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.