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Inventory woes for Island real estate's first quarter

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A house-for-sale sign on Pandora Avenue in Victoria. DARREN STONE, TIMES COLONIST. April 2022

Dwindling inventory and looming interest rate hikes have coloured the province’s real estate market a little blue in the first quarter of 2022 versus last year, according to numbers released Tuesday by the B.C. Real Estate Association.

The total number of sales recorded over the first three months of this year was down 20 per cent compared to last year, while in Victoria sales dropped off 23.8 per cent and the Island saw a 14.7 per cent reduction in sales activity.

Brendon Ogmundson, chief economist with the association, said while sales do seem to be moderating, this year’s sales figures are being compared to record-highs set last year.

“Through the first quarter and through the last year, a lot of what’s been shaping markets is low listings,” he said, noting demand for housing remains strong. “It’s just that there’s so few listings, so the price pressure remains pretty strong.”

The number of active listings was down 12 per cent to 19,618 at the end of March compared to last year across B.C., while in Victoria the number of listings plummeted by 22 per cent to less than 1,000 in that time.

According to the BCREA, that level of inventory is less than half of what would be needed to consider the provincial real estate market balanced.

As a result, sale prices were up 20 per cent across the province to an average of $1.08 million through the first quarter this year. In Victoria, the average sale price was up 18.6 per cent to $1.04 million and on the Island it increased nearly 30 per cent to $787,491.

Ogmundson said sales activity is likely to tail off later this year as a result of the “sharp rise in Canadian mortgage rates and expected tightening from the Bank of Canada.”

The Bank of Canada is expected to again hike interest rates today. It is the second hike this year after the bank raised its overnight lending rate to 0.5 per cent from 0.25 per cent last month.

Ogmundson said the effect all depends on how aggressive the bank is.

He said if the bank decided to stop raising rates at 1.75 per cent the BCREA would expect to see a 20 to 25 per cent drop in sales activity over the next two years, but if it decides to go as high as three per cent there would be a more severe impact of 35 to 40 per cent.

The BCREA estimates there are 70,000 homes under construction in the province, with as many as 6,000 of those in Greater Victoria.