The Canada Mortgage and Housing Corporation recently released an updated market outlook for Fall 2017, and if you’ve been paying attention to the market at all, their findings will not surprise you! Here are the 7 main takeaways:
1. Additional inventory is needed in order to balance Victoria’s housing market. Despite a high level of construction activity, there haven’t been many completed housing units since demand soared last year. With several thousand completed units expected in 2018 and 2019, these added listings should help to restore some market balance. Even so, demand will remain high and housing prices are unlikely to decline.
Wanted: more listings in Victoria! Source: Flickr
2. With thousands of rental units expected to be completed in Metro Victoria in the next two years, life should become a little bit better for renters in Victoria—with a catch. Vacancy rates will rise from 0.5% in 2016 & 2017 to 1% in 2018, and finally 1.5% in 2019. While this is good news for renters looking for vacant suites, newer rentals are expected to command higher monthly rates than the current average in Victoria. This will lead to an increase in the average rental rate in Victoria, and higher rental prices may push more residents towards buying a home rather than continuing to rent. If the average purchase price of a home in Victoria continues to rise along with rental rates, this could prompt some some Victoria residents to exit the region in search of more affordable housing.
3. Since 2015, seniors have been migrating to the Greater Victoria region at an increasing rate. This has also had an effect on housing demand, and many seniors moving from other metropolitan areas may be more willing to pay above-market prices for a home that’s the right fit. Victoria is often marketed as the best place to retire in all of Canada, so this trend is likely to continue—especially as more and more Canadians near retirement age.
If this is your deam house, it may end up costing you a lot. Source: Patrick Breen
4. As already mentioned, baby boomers are retiring, and this means there will be an increasing number of available jobs in the coming years. The demand for skilled labor in Victoria will increase, and this will result in even more migration to the region. With this influx of added labor force also comes the problem of how to house more people, and this could result in a second round of increasing market demand.
5. Mortgage rates are going up over the next few years due to a strong Canadian economy and an increase in interest rates as laid out by the Bank of Canada. This will make purchasing a home less affordable for many Canadians, and potential buyers will have a tougher time getting pre-approved for a mortgage loan if housing prices continue to rise.
With both house prices and mortgage rates going up simultaneously, buyers may need to downsize their expectations. Source: Meaghan O'Malley
6. It’s predicted that there will be fewer sales in the next three years than there were in the boom of 2016. There just aren’t enough new listings available to meet demand, and a continued rise in the average listing price will make it harder for potential homebuyers to find a home that’s both affordable and fitting.
7. Housing is going to become more expensive for everyone in Victoria. Average rent prices will be higher, mortgage rates are going up, and the average listing price will continue to rise for the foreseeable future. Some of this may be offset by increased demand for skilled labor, which will result in expanding wages. Victoria is likely to trend similarly to the significantly larger Vancouver market, though at a much more relaxed pace.
Even if the market does cool off, it might not stay that way for long. Source: Kathleen Franklin
If we take a step back and look at the data, it may be unrealistic to expect the return of a balanced housing market in Victoria. This analysis could be underestimating the number of people wanting to relocate to the region, the number of people who may want to purchase a home in the coming years (as opposed to renting), and the number of job openings that businesses will be unable to fill (which could accelerate migration in the coming years). All of these factors could put additional pressures on the market that haven’t been included in the forecast, in which case current housing construction still won’t be enough to meet increasing demand.
Something drastic would need to occur in order for housing prices to take a step backwards at this point. Average MLS listing prices increased at a shocking rate of 18% overall from 2014 – 2016; the most recent report expects an increase of 8% over the same period from 2017 – 2019, which is a much more sustainable rate of growth.
If you wait too long for market conditions to change, you might end up with a house like this! Source: Paul Sableman
If you’re planning on making a move, now may be a good time. Housing prices remain strong and will continue to increase, though the region can expect a more balanced market over the next few years. Current conditions are that of a seller’s market, with demand far outstripping supply as we await the completion of additional housing units.
But if you’ve been thinking about it, now may also be a good time to purchase a home. Mortgage rates are only going to go up from here on, so getting a mortgage now (while rates are lower) could end up saving you thousands of dollars per year in interest as opposed to waiting another few years for the market to cool off.
If you’d like to read the full report, you can do so HERE.
Feel free to contact one of us if you have any questions about this report or anything else related to buying or selling a home. We’re always happy to help!
Rob Davies and Ray Murray.