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Sluggish August sees fewer buyers, price cuts for higher-end homes

Sales have dropped as high interest rates and soaring inflation push new buyers out of the market.
The Victoria Real Estate Board is anticipating 350 to 400 sales this month, less than half last August’s 831 residential sales amid a red-hot market, and down from the 510 sales recorded in July of this year. THE CANADIAN PRESS/Sean Kilpatrick

August is living up to its reputation as real estate’s slowest month.

Karen Dinnie-Smyth, president of the Victoria Real Estate Board, said with just one week left in the month, sales have dropped as high interest rates and soaring inflation push new buyers out of the market.

Listings have dropped substantially again, and most buyers right now are those who have sold one property with the intention of moving to another, she said.

“They’re not new entrants [to the market], so that’s the cycle that we’re seeing right now. We are going to have to see interest rates come down somewhat before we start seeing much new entry into the market.”

Dinnie-Smyth said the board is anticipating 350 to 400 sales this month, less than half last August’s 831 residential sales amid a red-hot market, and down from the 510 sales recorded in July of this year.

Bobby Ross, a real estate agent with Pemberton Holmes, said there’s more at work than just the typical late-summer slowdown. “Rising interest rates, inflation and recession fears have all affected buyer sentiment and caused many to take a wait-and-see attitude,” he said.

Buyers hoping for some kind of deal due to the slowdown may be waiting a long time, depending on what segment of the housing market they are hoping to buy into.

Dinnie-Smyth said prices at the entry level of the single-family home market, which these days hover around $950,000 to $1.3 million, have remained fairly steady.

That market tends to be driven by people who have sold condos in the last year and are looking to move up in the market, she said.

The condo market is a “little softer” than the single-family-home market, she said, likely as a result of some condo owners selling to move into detached houses and the continued strong pace of condo and apartment construction in the region.

“We’re certainly seeing a bit more shifting in prices in the condo market than we are in the single-family dwellings.”

Danny Vales, an agent with Newport Realty, said a much-needed shift in the overall market has resulted in homes sitting longer without offers, fewer over-asking sale prices and fewer buyers being discouraged by the experience of losing out on homes due to competition.

“We will see properties remain on the market for a lot longer if they are not priced correctly,” he said. “Buyers have way more choices today, so if the property is listed too high or if it doesn’t show well, buyers will ignore the listing.”

Bobby Ross, an agent with Pemberton Holmes, said the shift has led to some price reductions, something not seen often over the last few years.

The market peaked in May, and it’s taking sellers time to adjust to the “new reality,” he said. “Sharply priced homes are still moving relatively quickly for the most part, but listings are definitely sitting longer. “

Ross said the increase in interest rates has also chipped away at buying power. “Buyers need to see value to make an offer and they are better educated than ever,” he said. “They know when a home is overpriced.”

Higher-end properties have seen price cuts in the six figures from their original listings.

For example, 8275 Lochside Dr. in Central Saanich, which has been on the market for more than 90 days, has twice cut its listing price from the original $5 million and is now listed at $3.9 million; 580 Seacliffe Rd., on the market for more than 70 days, dropped from $2.69 million to $2.295 million; and 565 Towner Park Rd., on the market more than 45 days, has seen its listing price drop from $3.5 million to $2.95 million.

Dinnie-Smyth said in many cases, the original prices reflect where the market was in March, April and May, when homes were selling quickly.

Vales said while he has seen significant price drops in the multi-million-dollar-home segment, more affordable properties are selling for close to list price, “provided that they are priced correctly.”

Despite the price cuts, Dinnie-Smyth said overall, the higher-end market is in good shape, with higher-than-usual sales activity.

She said pending sales — where the properties have been sold but have not yet changed hands — over the last 90 days for properties listed in excess of $2.5 million still have a sales-to-listings ratio of 95.7 per cent and were on the market an average of 29 days.

That compares favourably with figures from January through March, when those kinds of listings were on the market an average of 47 days and had a sales-to-listings ratio of 95.1 per cent.

In that group, some sold for the listed price, some sold for above-asking and others sold well below the originally listed price, she said. “So the high-end market right now is not far off [its norm].”

If more price softening is coming, Dinnie-Smyth said, it will likely start in the outlying areas before it hits the core.

“And then when the market picks back up, it tends to start in the middle and works its way out again.”

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