Market Intelligence - March 2023 Edition

March 2023

CAUTIOUS OPTIMISM IN OUR MARKET

The theme of our February data continues to focus on interest rates and lack of inventory as the key factors driving our market. The holiday season and indeed our January market experienced the worst decrease in activity. This past month marked something of a turning point with sales nearly doubling from January numbers. However, slower sales numbers do not equate to lower property prices. The overriding sentiment amongst buyers is that if sales are down, shouldn’t home prices also be falling? Currently, we are experiencing quite the opposite. A lack of new listings plagues our market. People don’t sell unless there is something for them to buy. The supply of listed homes has failed to keep pace with population growth, resulting in a shortage of inventory additionally pressuring buyers, keeping values elevated. Both the average and median prices of homes in the Greater Victoria Area have risen from their January values.

Last week, the results of a Reuters poll of 32 Canadian economists suggested that the Bank of Canada (BoC) is unlikely to change its current interest rates when it meets on March 8th. This comes after a period of uncer-

tainty, as many analysts had previously predicted that the BoC would continue to raise interest rates into the second quarter of 2023 in response to concerns over inflation. However, with the economy still recovering from the impacts of the pandemic and ongoing supply chain disruptions, many economists now believe that the BoC will maintain a cautious approach and keep rates steady for the time being. Given that it takes approximately 12-18 months for each rate hike to recognize its full effect on the economy, a pause in rate hikes seems like a reasonable course of action. This week marks the one-year anniversary of the first BoC rate hike.

Despite this, the tone of the upcoming BoC meeting is likely to be hawkish, reflecting ongoing concerns about inflation. Inflation has remained elevated in Canada in recent months, with prices for goods and services continuing to rise at a faster pace than usual. While some of this inflation is likely to be temporary, because of factors such as supply chain disruptions and pandemic-related restrictions, there are also concerns that it could become more persistent if left unchecked. As a result, on March 8th, the BoC is likely to communicate its commitment to keeping inflation under control, even if it means keeping interest rates on hold for the time being.

The latest data on inflation in Canada suggests that the economy is heading in the right direction, with inflation slowing more than expected to 5.9%. While this figure is still well above the BoC’s target of 2%, it is a positive sign that the measures taken by the central bank are impacting the economy. In their last meeting, the BoC emphasised that all policy decisions would be data-driv-

Absorption Rate

en, showing that they are closely monitoring economic indicators such as inflation in making their decisions.

The BoC’s data-driven approach to policy decisions reflects a broader trend in central banking, as institutions around the world increasingly rely on data and analytics to guide their decision-making. By focusing on real-time data and economic indicators, central banks can better understand the impact of their policies and make more informed decisions about how to support economic growth and stability. While there are still challenges ahead for the Canadian economy, the data-driven approach of the BoC is helping to provide some stability and direction.

The real estate market in British Columbia is showing signs of recovery, with optimism building among market participants. Buyer confidence has returned and positive growth is being observed across many regions of the province. This is a welcome change after a period of uncertainty and volatility, which saw many buyers and sellers adopt a wait-andsee approach. We are seeing positive growth as we move into our spring market, traditionally the busiest market for home sales here in Victoria.

A key factor contributing to the optimism in the market is the stabilisation of prices. After several years of rapid price growth, values have for the time being levelled off and are showing signs of stabilising with the Absorption Rate at 5.1 months of inventory. Currently, the average days-on-market for a single family detached home in Greater Victoria is 38. This has

Fig.

Single Family Detached - Greater Victoria - By Area

helped to improve buyer confidence and has led to increased activity in the market. Properties that are priced in accordance with current market conditions are selling at a good pace. This shows that buyers will enter the market when they perceive good value.

While there are still challenges ahead for the Canadian real estate market, including ongoing concerns around affordability and supply shortages, the current positive trend is a promising sign for the future. As the economy continues to recover and interest rates stabilize, the housing market feels like it could firm up.

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.