Victoria Real Estate Market Update Spring 2023
Victoria Housing Market Predictions for 2023 and Beyond
So far, 2023 has seen Victoria, BC’s housing market stabilizing from the extremes of 2022. While sales remain slow and prices have dropped from last year, both are increasing steadily as more inventory comes onto the market.
However, experts predict a strong recovery for Victoria Real Estate in 2024, when sales numbers will pick up again as a result of increasing inventory, an easing of financial restrictions and ongoing demand for homes.
Victoria house prices are also expected to start to increase slowly through late 2023 and into 2024, although they likely won’t return to the highs of early 2022.
Low inventory – especially a lack of new builds – and high demand are anticipated to continue to drive the housing market in Victoria, BC in the near future. The number of people wanting to move to the city does not seem to be waning, and this high demand for homes could result in a return to higher sales prices in the medium term.
Read on for more information about the Victoria, BC, real estate market in 2023 and our predictions for the housing market in Victoria in 2024.
Interest Rate Hikes Cooled Record Highs of 2022 Housing Market
Interest rate hikes put in place by the Federal Government during the second half of 2022 to reduce inflation cooled the housing market in Victoria and across Canada by limiting the number of buyers in the market.
According to the CBC, these interest rates reduced demand by limiting the amount buyers could borrow. They quote the Bank of Canada as stating that economic actions so far ‘have raised the carrying costs of mortgages significantly enough already that much of the excess demand for housing has now gone.’
Fewer buyers resulted in fewer bidding wars and a subsequent reduction in the average sales price. As this chart from the Canadian Real Estate Association shows, by the beginning of 2023, the average selling price had fallen from an all-time high in mid-2022.
By the fall of 2022, there were strong signs that for real estate, Victoria, BC, was returning to a more balanced market. The Times Colonist noted demand for inventory was almost back to normal, stating:
- A balanced market usually sees sales numbers at 15-20% of the available inventory. In 2021 Victoria had sales levels at 94% of inventory. However, by August 2022, this had fallen back to 28.1%.
Spring 2023 – The Start of a Housing Market Bounce Back?
According to the Victoria Real Estate Board, the first few months of 2023 saw slow sales, with April 2023 sales down 22.7% compared to April 2022. However, sales were 8% higher than in March 2023, showing positive signs that the traditional spring market boost may have returned.
House prices also followed the same trend, with April 2023 prices for an average single-family home in the Victoria core being down 11.3% from April 2022 but seeing a slight increase over March 2023.
Although the Canadian Real Estate Board reported that active listings in Victoria had increased significantly in March 2023, when compared to the same month in the previous two years, it noted that more inventory is still needed to balance demand.
Overall, there are several positive signs that confidence is starting to return to the Victoria housing market in 2023, such as:
- Buyer demand is starting to bounce back.
- Active listings are increasing.
- Interest rates remain high, but buyers have more choice and less competition.
- The high-pressure sales market seen a year ago seems to be easing.
- The home buyer rescission period, which was bought into effect in BC in Jan 2023, has given buyers more confidence.
BCREA Expects Strong Housing Market Recovery in 2024
So where do commentators think the Victoria housing Market will go over the rest of 2023 and into 2024?
The Vancouver Sun notes that BCREA is forecasting a province-wide 7% drop in sales by the end of 2023 as buyers struggle with high interest rates, but suggests this will reverse in 2024 with a rebounding 24% increase in sales.
For Victoria specifically, the BCREA suggests market changes will be more modest, with home sales falling by 3% and prices dropping by 5.7% on average by the end of 2023. These numbers are reflected in the table below, published by Real Estate Magazine.
Prices May Increase Again if Demand Outpaces Supply
While slow economics and elevated mortgage rates will continue to limit market growth during the rest of 2023, BCREA predicts that in 2024 we will see a strong recovery boosted by lowered interest rates and high immigration.
Mortgage Sandbox agrees that over the next year or so, the housing market will be impacted by:
- Federal immigration targets – which will bring more home seekers into communities.
- Interest rates – while variable mortgages rose from 1.7% interest in January ‘22 to 6.4% in March ’23, many forecasts suggest interest rates will likely be lowered during 2024 once inflation is more under control. This will boost buyers’ confidence, leading to higher sales.
However, it’s worth noting that any significant increase in demand may be an issue for Victoria. CMHC, in a housing report for 2022, predicted that supply constraints would continue to impact major Canadian centres in the medium term for new housing supply.
If Victoria’s market returns to one where demand outstrips supply, prices could swiftly increase again. VREB Chair Graden Sol has noted that ‘If listings do not pick up…. there is a risk that the price stabilization could turn, and we could see prices increase.’
In summary, during the remainder of 2023, the Victoria real estate market will likely experience prices that are lower than in 2022 but slowly increasing. Sales will also increase as seller confidence returns. The ongoing demand for homes in Victoria, coupled with easing financial pressures is predicted to lead to a rebound in both sales and prices during 2024.
Trust D.Fritz in a Changing Property Market
In this ever-changing housing market, you can rely on D. Fritz Appraisals to provide a fast and accurate home appraisal that reflects the current situation.
We make it our priority to understand the Victoria, BC, housing market so we can provide up-to-date and helpful property appraisals, whether you are looking to sell, buy, remortgage or need a valuation for another purpose.
To arrange a property appraisal from a certified member of our team, contact us today.
*Posted June 28, 2022
What do Experts Think the Victoria, BC Housing Market Will Look Like by 2027?
The state of Victoria’s housing market is never far from anyone’s mind, especially for first-time home buyers, those moving to a new area or for people looking to sell.
Between 2021 and 2022, house prices in the Victoria, BC region rose by an average of 20%. This significant increase came about due to the unprecedented combination of:
- All time low mortgage rates
- Higher disposable household income
- Significantly reduced housing inventory
While low mortgage rates created higher demand, the lack of available homes led to price increases and over-bidding.
Now, many people are asking when the market will correct itself. Although accurate predictions are impossible to make, it looks possible that there will be some slowing or reduction in house prices over the next five years.
Victoria’s House Prices are Up Over 20% Year Over Year
So says a report by VictoriaBuzz.com who also noted that prices on Vancouver Island as a whole rose by a whopping 32.8% in 2022 compared to 2021, putting homeownership further out of reach for many.
At the same time, inventory of available homes dropped significantly and BCREA Chief Economist Brendon Ogmundson is quoted as saying ‘While sales are not keeping pace with the unprecedented levels seen [in 2021], demand remains strong’.
Experts seem to agree that the accumulated gains from 2020-2022 are not sustainable and at some point, housing prices will fall. In a bid to control that reduction and avoid a crash like that seen in the US in 2008, the Bank of Canada increased interest rates throughout 2022 and it is predicted there will be further increases into 2023.
So, what impact is that likely to have on the Victoria, BC housing market in the coming 1, 2 and 5 years?
Pace of Real Estate Market Steady into Spring
In the Victoria, BC housing market, low inventory has continued to result in record low sales numbers. According to the Victoria Real Estate Board statistical round up for May 2022, sales were down 26.2% from 2021 – notably low for spring. And while they say that the recent interest rate increase and inflation have cooled demand slightly, there is still a lot of competition for each home on the market – especially those in lower price ranges.
Some good news came in a June 2nd piece in the Times Colonist – Victoria real estate market finally cooling off, but too late for some, which notes that housing inventory is finally picking up, with the number of houses available at the end of May up 30% compared to a year ago.
Opinions differ on what difference this will make to house prices though.
In their March 2022 article, Bubble burst risk: Canadian home prices predicted to fall by 24%, Urbanized.com states that the accumulated gains from 2020-2022 are not sustainable. They quote UK based research group Oxford Economics as predicting Canadian house prices could fall by 24% between the summer of 2022 and 2024.
This fall in prices isn’t likely to happen in Victoria though according to Mortgage Sandbox, who report values will continue to rise in 2022 across all housing categories. Although the rate of increase in price is slowing, there will still be a modest year on year increase of 8%.
An article from livabl.com supports this claim, listing Victoria as one of Five BC housing markets forecast to see the most price growth in 2022, and predicts house price increases of around 11% in the region by the end of 2022.
One thing most commentators agree on is that a sustained increase in inventory is the biggest influence on slowing or reversing price increases.
BC House Prices Forecast to Dip 3.8% Next Year
According to CTV News, RBC economists are predicting a moderate price correction in British Columbia in 2023, with average house prices expected to drop by 3.8%. They have suggested this will happen as a result of buyers being pushed out of the market as interest and mortgage rate increases shrink their available budget by up to 15%.
In turn, this reduced purchasing capacity will dampen some of the demand for available homes and reduce competition.
In their article ‘Will housing prices ever drop! Here’s what homebuyers should expect for the rest of 2022’, the fool.ca agrees with this prediction. They quote Moody’s Analytics as saying the Canadian Market likely won’t see any price correction before the end of 2023.
What Canadian Home Buyers Can Expect in the Next 5 Years
Unsurprisingly, long or even medium-term predictions are hard to come by, as no-one really knows what the impact of increased interest rates might be over time.
Narcity, in its article ‘Here’s what Canadian homebuyers can expect in the housing market over the next 5 years’ says that supply is the biggest issue affecting the housing market, and this might not change any time soon thanks to high material costs and construction labour shortages.
A recently released report by Leger and ReMax, titled– Unlocking the future, 5-year housing report, states that 61% of Canadians still see real estate as a good long-term investment, and 37% of people want to live in suburban areas, suggesting demand won’t be going away any time soon, especially for areas like greater Victoria.
It certainly seems like increasing home inventory is the only way to a market correction when it comes to price. As indicated by Storeys.com in its report, Speeding Up Development in BC Key to Calming Home Price Growth, in which it quotes a BCREA report as stating ‘If a flood of new completions (builds) were to enter the market and drive down the price of new homes, this will impact prices in the resale market (too)’
To summarize, in the short-term, Victoria, BC home prices will continue to increase but not at the same pace seen in the past year, while the chances of a longer-term correction appears to rely on more homes becoming available to buy.
Whatever the Market, Choose an Appraiser You Can Trust
At D.Fritz Appraisals Inc, we pride ourselves on staying up to date with the ever-changing housing market to ensure we offer accurate appraisals to sellers and buyers.
Based in Victoria and offering appraisal services across Vancouver Island and the Gulf Islands, we offer appraisal services to support mortgage approval, new construction valuation and inspections. Contact us today to book an appraisal.