A new report from the organization representing realtors in British Columbia offers a mixed bag of goods for Greater Victoria home buyers and home sellers as 2019 approaches.
First the good news for potential buyers. According to the British Columbia Real Estate Association (BCREA) fourth quarter housing forecast, the regional housing supply has been rising since the start of the year, with much of the credit — or blame, depending on the perspective — falling to senior levels of government responsible for new mortgage rules (federal government) and the speculation tax (provincial government).
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These current demand-depressing measures have coincided with new housing starts responding to the high prices of the past, as the number of housing units under construction in the Greater Victoria region has more than tripled over the past three years.
They are now 44 per cent higher than the previous peak in 2008 and experts might be concerned that housing supply is rising so fast, builders might end up sitting on units, prompting a pull back.
“Home builders are closely monitoring the absorption rates of their units currently under construction as well as assessing their capacity to increase production,” it reads.
In short, trends are moving in favour of potential buyers, provided they can pass the new mortgage rules, no small measure in light of the fact that Victoria has a relatively high share of what experts call highly indebted borrowers. Not surprisingly, the new rules have chased away potential buyers, which helps explain declining sales and the trend towards more balanced conditions.
“While home sales in Victoria have climbed since May, the effect of the mortgage stress test will likely continue to be a drag on demand over the next several quarters,” it reads.
But BCREA also has some good news for sellers and realtors. While government policies might have caused an “ebb in home sales” in the Greater Victoria region, the fundamentals remain strong, as the provincial economy continues to grow.
“After five consecutive years of strong economic performance, the resulting high employment level has pulled the unemployment rate down to a cyclical low, which is typically a precursor to upward pressure on wages and rising disposable income,” it reads.
Both ends of the demographic spectrum will also continue to boost demand. First, the region draws more than its fair share of retirees, most of whom are mortgage-free and not subject to the stress test, the report notes. “Moreover, retirees are less susceptible to the ebb and flow of the business cycle and are expected to help underpin housing demand in the region over the next decade.”
Their grandchildren — read: millennials — are also starting to enter the housing market as they start their own households. “Both local millennials reaching their household-forming life stage and millennial migrants seeking employment opportunities and housing affordability will bolster housing demand, especially in the urban areas of Victoria and Nanaimo,” it reads.
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In short, the region will remain an attractive destination likely able to weather any major downturns. For sellers, this means that prices will be relatively stable in 2019 after rising some six per cent in 2018.
Technically, the region remains a seller’s market, setting up a tantalizing prospect. On one hand, sellers would not be foolish to expect a nice return on their properties. On the other hand, potential buyers can afford to be more choosy, partly because governments have shrunk the pool of potential competitors, and partly because more supply is becoming available. Overall, the BCREA predicts a marginal uptick in sales