2nd Quarter 2024
A SPRING MARKET FOR OUR SUMMER
As we see the second quarter of 2024 now behind us, the real estate market in the Greater Victoria Area, continues to exhibit dynamic changes, reflecting broader economic trends and local developments. This report delves into the latest data, offering a comprehensive analysis of market conditions, including property values, sales volume, and emerging trends. By examining key indicators and providing expert insights, we aim to equip homeowners, prospective buyers, and investors with the critical information needed to make informed decisions in this vibrant coastal market. Whether you’re considering buying, selling, or simply keeping a pulse on the market, this report is your essential guide to understanding the current state and future outlook of real estate in Greater Victoria.
The wave of consumer hesitation we experienced in Q1 continued into the start of the second quarter. Departing from what is traditionally a bustling period, the convergence of moderate inventory levels and elevated interest rates significantly affected buyer confidence. Culminating in a sluggish start to the quarter. Potential buyers are exercising caution, wary of making significant financial commitments amid uncertain economic conditions. This apprehension has tempered the usual seasonal surge in activity,
highlighting the market’s sensitivity to broader economic factors and the critical role of consumer confidence in driving real estate dynamics.
The second quarter of 2024 in Greater Victoria real estate market witnessed a notable shift in momentum following the Bank of Canada’s rate drop on June 5th. This decision to lower interest rates, after a year of maintaining a fixed rate of 5.0%, acted as a psychological catalyst for both buyers and sellers who had been on the sidelines, waiting for a more favorable financial landscape. The immediate aftermath saw a resurgence in listing inventory and buyer activity, as confidence in the market began to rebuild.
This renewed activity has brought a dynamic change to the market, with more properties being listed and an uptick in buyer engagement. However, the market remains cautious and measured. Buyers, including subject conditions for financing, inspection, insurance, and document review, characterized a significant proportion of deals. Inclusion of these conditions ensures they are fully protected in their transactions, reflecting a prudent approach. Subject-to-sale purchases, where buyers’ offers are contingent on selling their existing homes, remain fairly common, underscoring the careful optimism prevailing in the market.
Despite the gradual increase in activity, the market’s response underscores the lasting impact of the previous high-interest rate environment. Buyers and sellers are proceeding with a level of diligence and caution that shows a market still finding its equilibrium.
This period of transition is crucial as it sets the tone for the rest of the year, with the rate drop serving as a pivotal moment that could shape future market trends and consumer behavior in our real estate landscape.
On April 18th, the Provincial Government’s announcement of stringent new regulations on shortterm rentals significantly affected the market. As of May 1st, the government has effectively outlawed the use of self-contained dwellings for short-term rentals, such as those listed on platforms like AirBnB. The only exception is for suites within an owner’s principal residence. This sweeping legislation has thrown the condo market into disarray, reverberating across the entire province.
The new regulations have sent shockwaves through the market, particularly affecting investors who had relied on income from short-term rentals as a key component of their retirement planning. Many condominium complexes were designed and marketed with the AirBnB investor in mind, factoring in expected rental income into the initial purchase prices. The abrupt policy change has resulted in an unprecedented surge of condominiums being listed for sale, creating a glut in the market and driving prices down.
For opportunistic investors, this turmoil presents a unique buying opportunity. The influx of condos has created a buyer’s market, with many properties priced lower than they have been in years. However, the caveat is that new buyers must be prepared to pivot their strategies from short-term rentals to long-term leasing, taking on the responsibilities of a traditional landlord rather than operating as hoteliers.
Those willing to adapt to these new conditions stand to benefit significantly from the current market dynamics, potentially securing valuable properties at reduced prices while contributing to a more stable and sustainable rental market in the long run.
The real estate market has highlighted an accelerating trend that underscores the challenges faced by new homeowners: the increasing reliance on intergenerational wealth transfers. With rising property prices and stringent mortgage qualification criteria, many first-time buyers find themselves unable to secure suitable mortgages without substantial down payments. In Canada, a significant 31% of firsttime home buyers receive financial help from their parents, with the average gifted amount reaching $115,000. This trend is even more pronounced in British Columbia, where the average financial gift skyrockets to $204,000. This reliance on family wealth is reshaping the landscape of homeownership, making it clear that without this crucial support, many aspiring homeowners would struggle to enter the market. As a result, the dream of homeownership is increasingly tied to the financial capacity of one’s family, highlighting broader issues of affordability and accessibility in the current real estate environment.
The second quarter of 2024 has underscored a critical issue facing the Greater Victoria real estate market and Canada as a whole: a record housing supply deficit. Historically, the ratio of population to housing unit starts in Canada has fluctuated between 1.2 on the surplus side and 2.3 on the deficit side. However, this ratio has now surged to an
alarming 4.2, showing an unprecedented shortfall in available housing. This severe deficit is the outcome of a confluence of economic and political factors, including robust immigration, high interest rates, sluggish construction activity, and municipal gatekeeping of development projects. The combined effect of these factors has stymied housing growth, exacerbating the gap between supply and demand. This pressing issue highlights the urgent need for comprehensive policy responses and strategic initiatives to stimulate housing development and address the burgeoning needs of a growing population.
Considering the record housing supply deficit, it has never been more crucial to support local developers who are striving to bridge this gap. By investing in new developments, buyers not only help stimulate the housing market but also reap many benefits that come with purchasing a newly built home. One significant advantage is the comprehensive 2/5/10 warranty, which provides peace of mind by covering labor and materials for two years, building envelope for five years, and structural defects for ten years. New homes offer a deficiency walk-through, ensuring that any issues are identified and resolved before moving in, providing a truly turnkey experience.
Modern aesthetics and contemporary design are hallmarks of new constructions, offering stylish, functional living spaces equipped with the latest amenities. These homes are designed to meet current building codes and energy efficiency standards, translating into long-term savings on utility bills and maintenance costs. Furthermore, recent changes to the
property transfer tax exemption limit make purchasing new properties even more attractive, offering significant financial relief to buyers. By supporting local developers and choosing new builds, buyers can enjoy a host of benefits while contributing to the much-needed expansion of the housing supply in Greater Victoria.
To support the real estate market and provide relief to homebuyers, the provincial government has raised the sale price threshold for a full exemption on the Property Transfer Tax (PTT) for new construction purchases. As of April 1st, 2024, the provincial government implemented an increase in the threshold from $750,000 to $1,100,000. This change reflects the rising property prices and aims to make homeownership more accessible for buyers looking at new builds. By elevating the exemption limit, the government has effectively reduced the financial burden on buyers, encouraging investment in new construction and supporting local developers. This change not only benefits individual homebuyers but also stimulates the broader housing market by promoting the development and sale of new homes within a more attainable price range.
Looking at the numbers, there were 2,102 sales of MLS listed property in Q2 of 2024, up 40.2% from the 1,399 sales in Q1. Compared to Q2 of 2023, sales are at equivalent to last year’s numbers which were 2,119 in 2023-Q2. There were 4,873 new listings that came to the MLS in Q2 of this year. That is a 36.8% increase in volume compared to the new listings which came to market in Q2, 4,873 listings. New listings in the quarter are up 27.6% compared to the same period in 2023, which only posted 3,689 new properties having come to market.
The Multiple Listing Service Home Price Index benchmark value for a single-family home in the Victoria Core was $1,314,000 in at the end of Q2 of last year. By Q2 of this year, this benchmark value had decreased by 1.4 percent to $1,295,500. However, compared to the value at the end of Q1 of this year, we have seen prices recover by 1.7%. Meanwhile, the MLS® HPI benchmark value for a condominium in the Victoria Core area was $567,300 at the end of Q2 last year. Comparatively, Q2 this year closed with a modest increase of 0.1 percent to $567,900. The lowest priced sale in the Greater Victoria Area this past quarter was a one bedroom, one bathroom condo in Saanich, Cedar Hill area selling for $248,000. The highest priced sale was a 6,000,000 Penthouse condominium selling in the heart of down town Victoria waterfront.
The second quarter of 2024 has been a dynamic period for the Greater Victoria real estate market, marked by several key developments. Despite an initial slow start because of high interest rates and increasing inventory, activity picked up following the Bank of Canada’s rate drop in June. With the anticipation of further rate drops this coming year, both buyers and sellers are acclimating to our market conditions.
