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More homes for sale in 2018, but Greater Victoria prices stayed steady

New mortgage rules and taxes, tougher tests for buyers and higher interest rates hit Greater Victoria’s real estate market in 2018.
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Construction at the Legato residential tower. December 2018

New mortgage rules and taxes, tougher tests for buyers and higher interest rates hit Greater Victoria’s real estate market in 2018.

The total number of sales dropped off compared with last year, there are significantly more homes for sale and the price being paid for real estate in the region climbed higher as builders hustled to keep pace with continued strong demand.

“It's been a year of transition or maybe a year of rebalancing,” said Kyle Kerr, president of the Victoria Real Estate Board. “When we look back on 2016 or 2017, it was all about growth, but 2018 has brought things back to a more balanced market.”

Through the first 11 months of the year, there were 6,775 home sales in the region, a drop off from the 8,482 at the same time last year, said the Victoria Real Estate Board.

While those sales numbers have decreased, the benchmark price for a single-family home and for condominiums have increased compared with last year. The benchmark tracks the value of a typical home in a specific location.

The benchmark price for all single-family homes sold in November in the capital region was $754,600, up from $715,200 in November 2017.

Greater Victoria’s core area — consisting of Victoria, Esquimalt, Saanich, Oak Bay and View Royal — also saw an increase in the benchmark price for a single-family home increasing to $865,200, up from $832,800 in November last year.

The benchmark price for a condo in the region rose to $493,400 in November, from $448,800 for that same period of time in 2017.

However, some agents report prices for higher-end homes have been reducing, though not as quickly as buyers would like.

That’s led to hesitation from those buyers and an increase in inventory.

There are currently 2,343 listings available for sale, a big jump from the 1,764 listed for sale at this time in 2017.

That increased inventory is also a byproduct of external factors introduced by governments to slow demand and a busy home construction sector that has been working at a near-record pace for more than two years.

Ron Neal of ReMax Alliance was surprised the inventory levels didn’t increase more significantly. “I was expecting a return to higher inventory levels, not just in the luxury home market,” said the real estate agent. “It’s trending that way, but it’s increasing more slowly than I anticipated.”

So far this year there have been 3,498 new homes started, slightly behind last year’s pace of 3,658 through November. In all of 2017, home builders started 3,862 new homes in the region — the most since 4,439 were started in 1976.

Casey Edge, executive director of the Victoria Residential Builders Association, said builders remain optimistic about the region, despite what appears to be a slight softening of the real estate market.

He said construction continues to be driven by strong migration from elsewhere in B.C. and across Canada by retirees or people attracted by the region’s robust and diverse economy.

Edge said there are no signs that will change next year.

But there remains uncertainty about what governments might still do to tweak the market, said Kerr, who said the market has already felt the impact of B.C.’s foreign-buyers’ tax and controversial speculation tax aimed at vacant properties.

“A lot of the [slowdown] has come from external measures with different levels of government tackling the housing attainability issue, and that’s challenging in a market like Victoria,” he said. “It will be interesting to see if the federal government does anything [else] with mortgage rules. And with the provincial budget in February, it will be interesting to see what their reaction is to their first full year in power and if the market will be subject to more tweaking.”

Neal traces the switch to a balanced market from an under-supplied sellers’ market entirely at the feet of the governments.

“Many parts of the market have shifted to a relatively over-supplied buyers’ market,” he noted, adding while it’s always difficult to predict the end result of government intervention, it does seem to have created a softer overall market.

Kerr sees a bigger issue evolving in an environment where government takes an active role in the market.

“My larger concern in B.C. is what message are we sending to the rest of Canada and the rest of the world,” he said.

“Sometimes we are saying we want your investment, we want your students here and we want you to travel here, but we don’t necessarily want you to buy a house here because we think you are manipulating our market.

“Victoria has always been a town of people who have come here for a better lifestyle ... it seems with some of these measures we are now saying we don’t want you here,” he said.

Having said that many experts still expect demand for housing in Greater Victoria to continue to be relatively strong.

Kerr said strong demand, the region’s buoyant economy, coupled with macroeconomic issues such as the low price of oil and trouble in the Canadian manufacturing sector, which could keep interest rates fairly low, might spur on the market and encourage more people to get into the market in 2019.

“Victoria is a very special place … the natural beauty and our lifestyle will separate us from other areas of B.C.,” he said, noting those other regions may bear more of the brunt of the new economic realities.

“The demand [in Victoria] will not wane so it becomes how do we build the right types of housing to make housing attainable for everyone.”

aduffy@timescolonist.com