MarketMonthlyIntelligence NOITIDETSUGUAAUGUSTEDITION2022 Terry DavidStockusParry 250.634.8356david.parry@theagencyre.com250.588.7933terry.stockus@theagencyre.com Presented by
A Year of Transition
Edition2022August-Parry&Stockus
It’s important to understand that here in the Capital we have, over the past couple of years, experienced a truly spectacular and unprecedented housing market. The perfect storm of record low interest rates, scarce housing supply, rising prices, and incredible demand. An exceptional time to be a seller; however, not quite as exceptional, should you have been a buyer. These types of markets, while highly profitable for homeowners, are not healthy overall for the greater housing market. A market out of balance is not sustainable and we are now seeing the market shift into a more balanced one. Buyers and Sellers now have some breathing room and the benefit of time to allow for proper due diligence and decision-making.
July, here in the Victoria Area, had 510 properties sold during the month; an almost 39 per cent decrease from this same peri od in 2021 and a 16.7 per cent decrease from June of this year. Listings increased 5 per cent compared to this past June, and increased a remarkable 70 per cent since July 2021. 2022 has been a year of significant transition for real estate across Canada, and Victoria is no different.
July 2022
MortgageAmount Previous Bank Prime Rate 3.7%* Mortgage Payment New Monthly4.7%RatePayment $200,000 $1,019.77 $1,129.29 $400,000 $2,039.54 $2,258.58 $600,000 $3,059.31 $3,387.87 $800,000 $4,079.08 $4,515.16 Increase of $54.77 per $100,000 in mortgage *Prime rate for the majority of banks in Canada. Fig. 1 Rate Hike What does it mean for purchasers? Edition2022August-Parry&Stockus
With the Bank of Canada - in an effort to quell inflation - raising its policy rate a full 100 basis points (one per cent) last month, they created strong headwind in the market. This move immediately affected the purchasing power of prospective buyers and is creating downward pressure on sellers and pricing. Inventory levels have been climbing these past several months as sellers try to take advantage of higher prices and the nicer weather. This added competition, however, only adds to that downward pricing Accordingpressure.toourtrusted mortgage broker, Dan Miller of The Mortgage Group, as interest rates lift from historic lows the changes in affordability are working their way through the marketplace. The effects of the recent 1 per cent increase in the Bank of Canada Prime Rate are as follows: For current borrowers in an adjustable variable product, the increase in monthly payments is approximately $54.77 per $100,000 of mortgage. For current borrowers in a static variable product, your payment will not change, only the portion paid toward the principal will adjust accordingly, unless your payment will no longer cover the Forinterest.qualification, the stress test remains the contract rate plus 2 per cent. The table opposite (Figure 1), illustrates the increase purchasers can expect in monthly payments in the current lend ing Expertsclimate.have largely taken the market transition as a sign that prospective home buyers are treading more cautiously. Rising inventory and decreased lending power have led to hesitation amongst buyers. They are very much taking a “wait-and-see” approach. This is never more clear than the rising days-on-market numbers. Listings with slower activity typically reduce prices after a week or two, and buyers are savvy to this.
The Absorption rate in the Greater Victoria Area climbed to 3.4 months of inventory in July. The Absorption rate is an excellent indicator of market balance. We consider balance to be between five and six months of supply. Below that is a seller’s market, and above is a buyer’s market. As you can see from the chart opposite (Figure 2), 2021 was one of the strongest buyers mar kets our region has ever experienced; however, since this past April we are gradually moving back to a balanced market with 3.4 months of inventory in July.
While home prices rise and fall in the short term, historically, real estate values increase. Now more than ever, Canadian fam ilies are viewing their properties more as a home rather than an investment vehicle and buying based on a long-term hold.
The benchmark value of a single family detached home in the Greater Victoria Area was $1,060,500 in July 2021. The bench mark value for the same home this past July 2022 increased by 20.7 per cent to $1,280,600 but was down 1.6 per cent from June’s value of $1,301,300. On the Saanich Peninsula, the Benchmark price for a single family detached home in July 2021 was $1,120,700. Over the year, the benchmark has increased 18.9 per cent to $1,332,600 this past July. However, it has dropped 0.8 per cent from $1,343,300 in June. The average selling price of a Waterfront property in the Great er Victoria Area during July was $2,336,250, with an average
5.1 5.7 5.3 4.7 4.1 4.0 3.9 4.0 4.3 4.2 4.0 3.7 4.2 4.6 4.3 4.7 5.6 5.2 3.5 2.8 2.4 2.2 2.0 1.6 1.9 1.8 1.5 1.4 1.3 1.3 1.3 1.3 1.4 1.3 1.2 1.1 1.4 1.6 1.6 1.7 2.2 2.8 3.4 0 1 2 3 4 5 6 2019 2020 2021 2022 Absorption Rate Absorption Rate InventoryofMonths Single Family Detached - Greater Victoria Single Family Detached - Greater Victoria - By Price Range 3.00 1.89 3.19 3.85 5.61 12.71 0 00 2 00 4 00 6 00 8 00 10 00 12 00 14 00 Under $800K $800K to $1.2M $1.2M to $1.5M $1.5M to $2M $2M to $3M Over $3M InventoryofMonths Edition2022August-Parry&Stockus
Fig. 2 Fig. 3
While the overall absorption rate in Greater Victoria is 3.4 months, when we examine absorption rates across specific price ranges (Figure 3), the results are interesting. Property in the $800,000 to $1,500,000 range remains in high demand, with only 1.89 months of inventory available; however, as we move up through each respective price range, we see the cooling effect illustrated. Ultra luxury, over $3,000,000 being the most affected, with now almost thirteen months of inventory available.
days-on-market of 32 days. On the Saanich Peninsula, the av erage selling price of a Waterfront property during July was $3,258,750, with an average days-on-market of 37 days. As we transition into a real estate market of higher interest rates, keep in mind the market still presents plenty of opportuni ties for buyers and sellers, especially for those looking to move Ifup.you would like to further the conversation on the current mar ket, discuss buying/selling strategies or gain an understanding of the market value of your home, we would be delighted to hear from you. Being a part of our boutique brokerage means benefiting from the strength of the whole. It means coming together with fellow real estate professionals who are constantly rethinking indus try norms and pushing themselves further through technology, design and service. It’s real estate without boundaries. It’s real estate that moves you.
Edition2022August-Parry&Stockus
The Monthly Market Intelligence is written exclusively by David Parry and Terry Stockus with valued input from other market experts. While the information contained herein is believed to be accurate, the authors assume no responsibility for any errors or omissions. Not intended to solicit business from individuals cur rnetly under contract. An independently owned and operated licensee of UMRO Realty Corp.
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