The next two years in Greater Victoria real estate will continue to see lower sales and higher inventories of homes available for purchase than in recent years, according to a forecast released November 6 by the Canada Mortgage and Housing Corporation (CMHC).
The “headwinds” facing Greater Victoria’s housing market will lead to a deceleration in average price growth, but it will not necessarily bring overall resale prices down.
The CMHC said of Greater Victoria’s resale prices, “While price growth in 2018 slowed, it remains above inflation and continues to outpace what would be expected given fundamental factors. Our outlook is for the pace of price growth to slow over the forecast horizon. Partially, this slowing in average price growth will come from a shift to more condo sales as opposed to single detached sales. It is likely that condo prices will continue to rise, albeit at a slower pace, until more supply is introduced into the market over the next two years.”
CMHC expects MLS resales to drop from 8,464 units in 2017 to 6,500-7,500 sales this year. Sales are then expect to slide further in 2019 to between 6,200 and 6,600, and then recover slightly in 2020 to the 6,300-6,700 range.
Home prices are expected to slow their growth, but not decline overall. The agency is forecasting the average Greater Victoria MLS home sale price to be between $693,900 and $703,300 this year (up from 2017’s $652,928). It is then expected to climb at a slower rate in 2019, to between $706,500 and $718,800, and then edge up again to somewhere between $710,000 and $722,400 in 2020.
The CMHC said that a major factor in falling sales and slowing price growth is rising interest rates making mortgage payments less affordable. It said, “Rising mortgage rates since May 2017 and stricter borrowing requirements are also having an impact on potential home buyers through two channels; 1) rising rates increase the carrying cost of holding a mortgage and; 2) rising rates have an impact on borrowing capacity.”
The agency also predicted the next two years for the rental market in the capital, and said it expected that vacancies will rise over the one per cent mark. The report said, “The primary driver of the increase will come from the introduction of new supply. Units already under construction will expand the universe of purpose built rental significantly.”
Average rents in the Victoria CMA are expected to increase, which will be partly due to the turnover of tenants in older apartments. The CMHC said, “The average rent paid in Metro Victoria is currently well below the price paid by new entrants to the market. As older units turn over, their rents will be increased to reflect the new price level. As such, the average rent will increase, in part, as the lower end of the price distribution catches up to current market prices.”
Slower sales and higher inventory will cause average home prices across B.C. to “hold steady” over the next two years, said the federal housing agency.
The CMHC said in its report, “Shifting market conditions across BC’s large urban centres is resulting in movement back towards balanced or even buyers’ market conditions in some cases, which is beginning to flatten price growth or, in some areas [such as Metro Vancouver], result in price declines.
“Overall, we anticipate MLS® sales to trough in 2018 and see some recovery in 2019-20 while MLS® average prices will see a relatively flat growth profile with some risk of decline as demand and supply find a new balance.”
CMHC expects MLS resales across B.C. to drop from 103,759 units in 2017 to between 76,600 and 83,400 sales this year. Sales are then expect to increase somewhat in 2019 to between 79,100 and 87,900 units, and then in 2020 to range between 81,500 and 92,500 sales. They are not expected to return to the 100,000 mark seen in 2016 and 2017.
The agency is forecasting the average B.C. MLS home sale price to be between $683K and $749K this year (2017 average sale price was $709,597). It is then expected to range from between $681,800 and $756,200 in 2019, and then hit somewhere between $675,400 and $758,600 in 2020.
The CMHC added in its report, “Housing starts activity in British Columbia should moderate as economic and population growth slows.”
The agency also predicted the next two years for the rental market in the province. It said, “Rental market conditions across B.C. are anticipated to loosen as a result of slower growth in demand and a significant amount of new rental units set to enter the market. However, demand for rental is anticipated to remain fairly robust and result in the apartment vacancy rate for the province increasing gradually through to 2020. Meanwhile, average rents for purpose built apartments are anticipated to continue to see increases stronger than inflation in both 2019 and 2020.”