Central 1 Credit Union is predicting a steady increase in real estate prices for the Greater Victoria region over the next three years, but limited inventory will lead to a drop in the number of sales this year and in 2019.
Those numbers were included in a new report that suggested the province is seeing stronger home sales this year.
That had Central 1 rethinking a previous forecast that saw more of a downturn.
“We expect resale home transactions to ease 10 per cent in 2017 compared to our previous forecast of a 17 per cent decline and rebound in 2018 and 2019,” said deputy chief economist Bryan Yu. “A median price decline of 2.2 per cent this year will be due to a shift in sales away from Metro Vancouver to less expensive areas and the sale of fewer detached homes and luxury units in Vancouver.
“Prices will increase by 5.5 per cent in 2018 and 3.1 per cent in 2019.”
In the capital region, median resale prices are forecast to increase 10 per cent this year to $550,000, then increase 5.3 per cent in 2018 to $579,000 and then again 2.4 per cent in 2019 to $593,000.
Central 1 said house prices will keep increasing throughout the forecast period due in large part to a collapse in inventory over the past year, with expected gains driven by the Vancouver Island and Kelowna regions this year, before Metro Vancouver takes the lead again.
It’s more of a mixed bag when it comes to transactions.
In Greater Victoria, Central 1 forecasts there will be a 5.9 per cent drop this year to 8,400 sales, before rebounding to 8,600 in 2018 and falling again to 8,200 in 2019.
The report pointed out inventory levels are a major factor in both number of transactions and price increases.
“Outside of northern B.C. and, to a lesser extent, the Kootenays, active listings have declined to the lowest levels in more than a decade in the Lower Mainland, Vancouver Island, and the southern Interior,” it said. “While this largely reflects an inventory drawdown from high sales, there has been no sign of a pickup in new listings, which we would expect in response to stronger sales and prices.
“Similarly, new home inventories have also been squeezed to near record lows. Lack of inventory and choice of product, has been an impediment to even higher sales in some larger areas.”
The report noted that demand will continue to be driven by low interest rates, an expanding economy, population growth, demographic changes, and the desire for homeownership. Early 2017 sales are close to the 10-year average, following an exceptionally strong 2016, which makes year-over-year comparisons appear dire.
The lack of new listings has kept sales down and prices higher than expected, Yu said. Tighter mortgage insurance criteria for borrowers introduced late in 2016 have had less of an impact on the market than anticipated.
