Monthly Market Intelligence - February 2023

February 2023

A SLOW YET OPTIMISTIC START

Our January real estate market performed about as well as most economists had expected here in the Greater Victoria Area. With all eyes on the Bank of Canada and the expectation of another 0.25% rate hike, most buyers and sellers adopted a wait and see attitude. By mid-month, however, we saw buyer activity gain momentum. Bank of Canada signalling that this last rate hike will be the final one for now and with inflation numbers improving, consumer confidence seems to have returned.

There were 1,739 active listings for sale on the MLS system at the end of January, a slight 3 per cent increase from December and a more modest 133.7 per cent increase from January 2022. Welcome news for buyers struggling to find inventory that meets their requirements. Only 278 properties sold in January in the Victoria Real Estate Board region, down 41 per cent from last January and 13 per cent down from December, marking easily the slowest January on record. The absorption rate, however, rose to 5.3 months of inventory in January, much closer to what they traditionally considered a balanced market.

With mortgage rates being the hot topic, our mortgage expert Dan Miller tells us the golden question right now is: should I choose a fixed or variable rate? We wish had a straightforward answer, but it really is borrower dependent.

Currently, fixed-rate mortgages are on a downward trend compared to variable rate mortgages. Fixed mortgages move

faster than variable products and are already factoring in future market expectations of lower rates. Variable rates are at a multi-decade high and are at the mercy of the Bank of Canada, thanks to the highest prime rate we’ve seen for many years. With the Bank of Canada signalling that it will leave prime “as is” for months, if not quarters, there has been a client exodus from variable mortgage products into fixed-rate mortgages. In addition, many homeowners in variable products have opted to lock-in to fixed rates in order to weather the interest rate storm.

The ability to lock-in a variable rate mortgage is indeed one of its fundamental benefits. However, home owners should carefully assess this option. With a lock in, you would not have to worry about potential further interest rate increases, but you will have limited the downside rate drop potential that may happen later this year or early 2024. Once you have moved to a fixed rate, switching back to a variable is extremely difficult and potentially quite costly.

In other news this past month, Victoria city council voted to move forward with their Missing Middle Housing Initiative. The Missing Middle Housing Initiative proposes to allow “houseplexes” and corner townhouses beside single-family homes in traditional residential areas of the city. They aim to conserve homes with heritage merit by allowing other homes to be built on the same lot as the heritage registered building. This initiative should create more homes and housing choice. It expedites construction as missing middle homes that meet established design guidelines can proceed to construction, without the need to rezone, in the same way single-family homes do today. It makes it easier for people, especially young families and seniors, to stay in the city and live closer to where they work and shop, supporting the local economy and sustainability.

Victoria council’s decision is a significant step in the right direction when we are considering how low inventory has affected the attainability of housing in the Greater Victoria Area. Ideally, many of our other local municipalities will focus on adding medium density where they can. This approach is an excellent

Absorption Rate

mitigating factor against supply related price increases.

Benchmark values for a single family home in the Greater Victoria area were $1,117,400 in January, a very slight dip from December’s value of $1,135,600. The median days on market for homes priced between $800,000 and $1,200,000 on the peninsula are 13. The average days on market for homes selling between $1,200,000 and $2,000,000 is 46.

While sales for the month of January were low, we believe this does not portend the future of our market. What the data doesn’t show is the buyer optimism that returned mid-month - a surge in buyers actively viewing homes and making offers. It may be that consumers are moving past the market shock of the rate increases and our market is regaining its equilibrium. Sales are on the increase at the time of writing this report and prices have remained relatively unchanged.

We remain optimistic that as we enter our spring market, historically the busiest season in real estate here in the capital, the housing industry is once again ready to get going.

Absorption Rate

Now more that ever, we remain steadfast to you, our clients, in providing the most educated and thorough understanding in this time of uncertainty. If you would like to further the conversation on the current market, 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 industry norms and pushing themselves further through technology, design and service.

Fig.