Victoria Home Sales to Slow Due To Lack of Inventory

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 What a year.

2016 was a banner year not only for REALTORS® but for home owners earning equity as well.

Even though transactions slowed in the second half of the year, house sales across British Columbia still set records thanks to the hot market during the first 6 months.

112,209 units changed hands last year, which is a 9.5% increase over 2015.  That equated to a dollar volume of $77.6 billion, 18.8% over 2015, and the average home price in the province jumped 8.6% to $691,144.

BCREA chief economist Cameron Muir:

 “Broad-based consumer demand driven by strong economic conditions, employment growth, consumer confidence and an expanding population base pushed home sales to record levels in many B.C. regions last year,” said “However, home sales have fallen back from their lofty peaks early last year.

In December alone, 4,721 homes were sold in B.C., which was down 28.4% compared with December 2015. Total dollar volume fell 33.1% to $3.1 billion. The average sale price in the month was $654,699, representing a 6.6% year-over-year decline.

Vancouver and Toronto still have the highest influence on average Canadian home prices, according to the Canadian Real Estate Association, which compiles its monthly data using BCREA figures, but Vancouver’s influence is on the decline.

“Greater Vancouver’s share of national sales activity has diminished considerably over the last year, giving it less upward influence on the national average price,” the CREA said in a January 16 news release. “The [national] average price is reduced by almost $120,000 to $352,513 if Greater Vancouver and GTA sales are excluded from calculations.

 Housing demand across the province is expected to moderate next year as declining affordability related to rising prices and government policy interventions limit the number of eligible buyers.

However, while home sales are not expected to repeat this year’s record performance, consumer demand is expected to remain well above the 10-year average.”

The supply of homes across B.C. is expected to increase next year as demand moderates and new home projects are completed, the BCREA said in its report.

“A trend toward more balance in the market will unfold next year and exert less upward pressure on home prices,” the report said. “In addition, a larger contraction in the number of high-end home sales will contribute to moving the aggregate average price statistic lower.”

In November, the BCREA published a report that said prices and unit sales are expected to continue

The Victoria, Vancouver Island and Powell River Sunshine Coast Real Estate Boards service the Vancouver Island-Coast Region of the province. Housing demand across the region has reached record levels this year. Robust demand has created some challenges around the supply of homes for sale, leading to erosion of affordability.

Strong economic growth in the province has translated into rising employment levels and increased consumer confidence. After several years of relative weakness, employment growth in the Victoria Census Metropolitan Area (CMA) has been particularly robust over the past year. The Vancouver Island-Coast region has diversified away from primary industries, with four out of five jobs now in the service sector. The region’s abundance of natural amenities makes it a preferred tourist destination, and the relatively weak Canadian dollar has provided an attractive incentive for international visitors. Hotel room revenues are expected to rise VANCOUVER ISLAND-COAST 10 per cent in Victoria and 19 per cent across Vancouver Island this year. In addition, one out of every four public administration jobs in the province are located in the Vancouver Island-Coast region, which moderates the impact of oscillations in the business cycle.

Population growth is being bolstered by a marked increase in interprovincial migration, as labour demand attracts attention from across the country. A growing number of retirees from the Lower Mainland are also choosing to cash-out and relocate to the Island.

Home sales through the MLS® in Victoria are forecast to reach a record of over 10,000 units this year, a 29 per cent increase over the previous year. The previous record was 8,403 unit sales in 2007. This will be the third consecutive year of rising consumer demand in the province’s capital.

Housing demand across the Vancouver Island Real Estate Board (VIREB) region is also expected to post a 15 BCREA HOUSING FORECAST November 2016 record level of consumer demand this year, with a total of 10,600 unit transactions, up 27 per cent from 2015, eclipsing the previous record of 9,887 units sales 2007.

Strong consumer demand has drawn down the inventory of homes for sale and the lack of supply has become a significant impediment for home buyers in many areas. Total active listings on the market are down 45 per cent in Victoria and 37 per cent across the rest of Vancouver Island. As a result, the imbalance between supply and demand has created strong sellers’ market conditions and pushed home prices notably higher.

Tight supply conditions have also not gone unnoticed. New construction activity is up significantly, with multiple starts expected to climb 66 per cent to 2,200 units in Victoria this year. While the supply of newly completed and unoccupied units remains low, we expect a pull-back in housing starts next year as home builders concentrate on completing their existing projects.

Consumer demand is expected to moderate in tandem with a general normalizing trend in the province. While record home sales have driven new construction activity higher, less robust provincial economic conditions are beginning to unfold. Total MLS® residential sales are forecast to decline 9 per cent to 9,280 units in Victoria in 2017, while across the VIREB area residential transactions are forecast to fall back 11 per cent to 9,400 units. However, this level of consumer demand is well above long-term averages and this forecast represents a return to a more sustainable level of housing demand and a less severe erosion of affordability.

The average home price is forecast to increase nearly 11 per cent to $578,200 in the Victoria Real Estate Board area this year and a further 2.1 per cent $590,000 in 2017. Across the VIREB area the average home price in forecast to rise 13 per cent to $380,000 this year and a further 2.6 per cent to $394,000 in 2017.