David Parry
david.parry@theagencyre.com 250.634.8356
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terry.stockus@theagencyre.com 250.588.7933
FOURT
2023
FOURT
Terry Stockus
A R T ER QU
A R T ER QU
Presented by
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Quarterly Market Intelligence
Stockus & Parry - Fourth Quarter 2023
4th Quarter 2023 A YEAR IN REVIEW 2023 was a fascinating year for real estate in British Columbia that was punctuated by significant developments that have had far-reaching effects on the market and its stakeholders. With 2024 upon us, we would like to take a moment and return to the major events and trends that shaped the real estate landscape in the province over the past year. 2023 brought profound changes to our market place: the Bank of Canada’s interest rate hikes, the introduction of pivotal provincial legislation, and the new reality many municipalities are now facing in consideration of their ability to control land use are but a few of the momentous changes to the real estate landscape.
The series of interest rate hikes had a multifaceted influence on British Columbia’s real estate sector. On one hand, the higher cost of borrowing put pressure on affordability, leading to a slowdown in home purchases. These measures served as a prudent step to rein in soaring home prices and ease concerns of a housing bubble, which had been a cause for unease among industry experts. While the media consistently bombarded property owners here in BC with the threat of a real estate market destined for a glut of below-market deals and foreclosures, instead we realized a market that saw asset values holding strong. Continued low levels of inventory was the counter-strike to a market that was under pressure with higher interest rates. It’s important to keep in mind that 54% of home owners in British Columbia have lived in their homes for ten years or longer. This represents a vast amount of accumulated equity in homes. Ten years of mortgage down payments notwithstanding, prices of
Stockus & Parry - Fourth Quarter 2023
The central focal point in 2023 was the Bank of Canada’s deliberate decision to implement multiple interest rate hikes throughout the year. They undertook these actions with the primary aim of curbing inflationary pressures and ensuring the long-term stability of the Canadian economy. While these rate increases had a discernible impact on the real estate market, resulting in higher borrowing costs for prospective homebuyers and a deleterious effect of real estate sales, BoC deemed them necessary to maintain economic equilibrium.
With real estate sales volume remaining under pressure, we expect we will see lenders compete for mortgage business in the months to come. Financial markets use the bond yield to establish values of Fixed-Rate mortgages. Currently, the 5-year bond yield is 3.08%, the Fixed Rate for a 5-year insured mortgage is hovering at 5.19%. The discrepancy between the bond yield and the fixed rate is significant. The last time the bond yield was at 3.08% was May 15, 2023, when a 5-year fixed rate was 4.59%. This signals that mortgage lenders have 0.5%-0.8% of bandwidth to move fixed rates down in order to stay competitive with one another. The BoC may not need to lower rates as soon or as quickly as we think, as the market just might do it for them. 2023 saw the provincial government unveil several landmark pieces of legislation to combat the ongoing housing crisis. These captured significant attention throughout the year. These changes, a comprehensive response to the pressing issue of housing affordability and availability in British Columbia include measures aimed at cracking down on short-term rentals, legislation that takes aim at single-family zoning, reforms to the way municipalities collect fees from developers, and new minimum requirements for building heights and densities that municipalities must allow.
Stockus & Parry - Fourth Quarter 2023
properties have almost doubled in the past 10 years! This record appreciation has allowed homeowners to weather significant financial storms. Of those 54% of BC homeowners, 45% are mortgage free!
One of the most significant aspects of these legislative changes was the establishment of ambitious housing targets. The Province set these targets with the obvious intention of increasing the supply of affordable housing and making homeownership more accessible to a wider cross-section of residents. By encouraging the construction of affordable housing units and optimizing land use within urban areas, the government sought to bring about a more balanced real estate market. While the province presented a roadmap towards addressing the housing crisis, not all municipalities were equally enthusiastic about embracing these changes. A noteworthy point of contention arose as some municipalities found themselves on David Ebby’s “Naughty List.” These jurisdictions exhibited resistance to implementing the reforms mandated by provincial legislation. Their concerns chiefly revolved around encroachments on their autonomy regarding zoning and construction regulations, besides downloading the responsibility of construction starts onto developers. Despite this resistance, the development community has regarded municipalities as the single largest hurdle to new construction within our industry for many years. They hinder the process with absurd degrees of red-tape and bureaucracy. An additional fly in the ointment that perhaps is not being talked about enough is that 20% of the construction workforce here in BC is set to retire this decade. Municipalities expressed apprehension that the new legislation would disrupt their established
The government articulated that municipalities failing to align with the prescribed housing targets and regulations could face repercussions. The most significant of these repercussions was the possibility of losing control over zoning and construction within their jurisdictions. This measure aimed to ensure a consistent and concerted effort across the province to address the housing crisis and mitigate the emergence of housing market disparities. Mid last year, the government turned its attention to Short-Term-Rentals. The province introduced stiff penalties for operators who violate local regulations. The legislation will also require shortterm rental platforms as Airbnb and VRBO to share data with local governments to aid in enforcement and support tax auditing at provincial and federal levels. Short-term rental platforms will be required to display business license numbers in listings and remove those without them promptly. The conversion of short-term rentals into longterm housing in municipalities with populations over 10,000 will primarily involve restricting them to the host’s principal residence. Hosts may rent out their principal residence plus one secondary suite or
Stockus & Parry - Fourth Quarter 2023
urban planning strategies and local decisionmaking processes. This resistance created a unique dynamic within the province, with some regions showing a more proactive approach to housing reforms, such as Victoria’s Missing Middle; while others preferred to maintain the status quo.
The Province also desires to establish greater transparency regarding short-term rentals, including the creation of a provincial host and platform registry by late 2024 for increased accountability and a provincial short-term rental compliance and enforcement unit. In 2023, sales in the Victoria Real Estate board MLS area amounted to 3,005. This number is down only slightly from 2022’s final sales number of 3,264 total sale. The annual average sale price was $1,288,448, and the total dollar volume of $3,871,787,132. Our real estate market this past year has shown remarkable resilience and optimism. As we move into spring, indicators point towards an increasingly active market, with sales beginning to pick up momentum. The stability of housing prices and the expectation of lower rates on the horizon bolsters this positive trend and are key factors in maintaining market confidence. Both buyers and sellers can expect promising opportunities as Victoria’s real estate sector gears up for a vibrant and busy spring. This forecast not only reflects the inherent strength of our market but also a healthy and sustainable growth trajectory as we continue into 2024.
Stockus & Parry - Fourth Quarter 2023
laneway home/garden suite on the property. There will be specific exemptions for certain regions and for communities under 10,000 population, unless they are within 15 kilometers of larger municipalities.
Terry Stockus 250.588.7933 terry@stockusandparry.com theagencyre.com
David Parry 250.634.8356 david@stockusandparry.com theagencyre.com
Luxury is more than a price point, it’s an experience. The Quarterly 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 currently under contract. An independently owned and operated licensee. © David Parry & Terry Stockus, 2024