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Capital region housing shows signs of overheating amid low inventory: CMHC

There are signs of price ­acceleration and ­overheating as inventory declines in the Greater Victoria housing ­market, Canada Mortgage and Housing Corp. said Tuesday.
An aerial photo of a Victoria residential neighbourhood. [Adrian Lam, Times Colonist]

There are signs of price ­acceleration and ­overheating as inventory declines in the Greater Victoria housing ­market, Canada Mortgage and Housing Corp. said Tuesday.

A record-low number of listings in the capital region has created an ongoing sellers’ ­market, even as sales of detached houses are showing signs of slowing in the second quarter, ­Pershing Sun, a CMHC senior analyst said in an assessment of the capital region’s market.

Prices have been rising as demand has moved from single-detached homes to attached homes — such as townhouses — and apartments, she said. “With limited inventory, competition remains fierce among buyers.”

Continuing low mortgage rates have been the strongest factor driving interest in homeownership, Sun said.

Job growth is also leading to higher incomes, resulting in more disposable income and appreciation in home values, she said.

Sales were down by 27 per cent from the previous quarterly report, released in March, when the Greater Victoria market was also deemed to be moderately vulnerable.

Steady sales depleted inventory, resulting in the lowest level in two decades, using seasonally adjusted figures, Sun said.

Out-of-town buyers purchasing homes have been partly responsible for the tighter inventory. Sun said capital region prices look discounted compared to Lower Mainland-area prices. And when those purchasers buy, they don’t have a local home to list.

Greater Victoria home prices rose in the past two quarters, with the average price climbing by 22 per cent. Detached houses saw the quickest price appreciation, Sun said.

Condominiums in Saanich East and Langford became two of the largest sub-markets for sales in the region in the past two years, Sun said.

Urban condos and detached housing in Langford and Saanich East are helping to keep the region in a sellers’ market with plenty of competition.

At the same time, Sun said Greater Victoria’s market has a low incidence of overvaluation.

The capital region has seen builders shift their focus to more attached homes, as apartments represent the bulk of finished and under-construction inventory, she said.

“Residential building permits for the first half of this year reached the highest level since 2018 and signalled future supply gains,” she said.

On a national basis, CMHC cautioned that Canada’s housing market has moved to a high level of vulnerability, fuelled by overvaluation and price acceleration in cities in Eastern Canada, such as Hamilton, Toronto, Ottawa and Halifax.