Monthly Market Intelligence - November 2022 Edition

david.parry@theagencyre.com 250.634.8356

N R E DI TI O

David Parry

2022

M

terry.stockus@theagencyre.com 250.588.7933

R EDI TI O N N OV E

Terry Stockus

BE

BE

Presented by

N OV E M

Market Intelligence

MODEST INCREASE IN SALES & INVENTORY The slower market conditions we have been experiencing these past few months have continued to carry into November here in the Greater Victoria Area market. The fall market is historically a slower period for real estate sales here in the capital. This year, however, has been challenging, with the Bank of Canada continuing to raise the target overnight rate. Since this past March we have seen the Prime rate move from 2.70%, to now, as of October 26th, 5.95%. The influence these rate hikes have on our local market cannot be understated. This market remains in transition.

Buyers are apprehensive about making offers, hoping to see significant price reductions, and similarly sellers are actively watching their competition for any signs of price movement.

When the interest rate goes from historically low values to a more typical rate, such as we are seeing now, the market will revalue. The real estate market acts no differently from the Bond market or the Stock Market in this capacity. The question on most people’s minds is when that revaluing will happen, and by how

Stockus & Parry - November 2022 Edition

November 2022

Should there be a point where borrowers reach their trigger rate (where principal and interest payments no longer cover the interest charged), they will be contacted by their lender directly and will be advised to adjust the monthly payment or consider making a lump sum payment.

This past October, 480 properties sold in the Greater Victoria Area down 32.6% from the 10 year average October sales number. However, we have experienced a 17.1% increase from this past September, and we have seen the absorption rate finally plateau at 4.8 months (Fig. 1) of inventory after a significant period of increases which trended alongside of the Bank of Canada hikes. We should note that the last scheduled Bank of Canada policy announcement for the year is set for December 7th.

Single Family Detached - Greater Victoria

6

5.7 5.3

5.1

Months of Inventory

What does a 5.95% Prime lending rate mean for mortgage holders? Mortgage specialist Dan Miller explains, for adjustable-rate borrowers (ARM), this increases monthly payment of approximately $29.36 to $30.85 per $100,000 borrowed on a 25 or 30-year amortization on schedule. There is no impact on current fixed rate borrowers. Similarly, Variable Rate Mortgage borrowers (VRM) also see no change to their payment with Prime changes. However, the portion that goes towards principal vs. interest will be adjusted accordingly.

Absorption Rate

Fig. 1

5

4.2

4.9 5.2 4.3

4.1

4.7

4.6

4

5.6 4.7

4.0

4.0

3.9

4.3

4.8 4.2 4.0 3.7

4.0 3.5

3.4

3

2.8

2.8 2.4

2.2

2 1

1.9

1.8 1.6

1.4

1.6

1.5

2.2

2.0

1.7

1.6

1.4

1.3

1.3

1.3

1.3

0 2019

2020

2021

2022

1.4

1.3

1.2

1.1

Stockus & Parry - November 2022 Edition

much? Some are calling for a bubble, others say there are still strong fundamentals and likely we will not see a significant revaluing of property prices. Finally, some say we have already priced it into our local market. Despite what happens in the months to come, the Victoria market remains relatively stable when compared to Canada’s other large city centres, such as Vancouver and Toronto. To a large degree, our limited housing inventory, compared to those of other larger cities, has insulated us from significant price revaluing here in the capital.

Single Family Detached - Greater Victoria - By Area

Months of Inventory

7.00

5.73

6.00

4.90

4.73

5.00

4.20 4.00

3.00

3.58

3.41

3.00

2.63

2.55

2.63

2.52

MLS Home Price Index benchmark values for a single family home in the Greater Victoria Area were $1,193,600, down from $1,218,500 in September of this year. The benchmark price for a single family home in October 2021 was $1,079,800. The benchmark price of a condominium was $596,700 last month, down from $609,900 in September; however, up from $518,800 in October 2021. Finally, the benchmark price of a townhouse in the Greater Victoria Area was $802,500 in October, down from $818,800 in September and up from $723,200 in October 2021.

1.89

2.00

1.24 1.00

0.00

Absorption Rate

Fig. 3

Single Family Detached - Greater Victoria - By Price Range

12.00

Months of Inventory

10.91 10.00

8.00

6.00

5.51

5.88

4.00

3.04 2.24 2.00

1.15

0.00 Under $800K

$800K to $1.2M

$1.2M to $1.5M

$1.5M to $2M

$2M to $3M

Over $3M

Absorption rates remain stable and show a Seller’s Market in most of our local municipalities and distinct market areas (Fig. 2).

Victoria, Esquimalt, Central Saanich, Sidney, and parts of Saanich notably having less than three months of inventory. By price range (Fig. 3), we continue to see strong demand and lower months of inventory in the market under 1.5M. 1.5M to 3M is currently displaying signs of some balance with absorption rates between five and six months. The high-end luxury market above 3M continues to struggle with almost 11 months of inventory, showing a strong Buyer’s market. This is due entirely to a large inventory of property and a diminished buyer pool in this segment. There are, at the time of writing this report, 91 single family detached properties for sale above 3M. Despite these numbers in the luxury segment, property continues to trade. However, pricing remains fluid in many of those transactions, with the average List Price to Sold Price being only 92%.

Stockus & Parry - November 2022 Edition

Absorption Rate

Fig. 2

This is an evolving market, but what we can certainly determine from this information is that we are seeing an increase in activity, higher sales numbers, and sharply priced homes are certainly receiving attention. October closed with 2,192 active MLS listings for sale. Slightly fewer than September of this year, down 4.7%.

Of note, this same period in 2021 was a market starved for inventory. October 2021 had only 1,036 active listings, making up a 111.6% increase in listings year-on-year.

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.

It’s real estate without boundaries.

It’s real estate that moves you.

Stockus & Parry - November 2022 Edition

Finally, having recently undertaken elections in many of our local municipalities, with new mayors and councillors, Terry and I hope that council agendas continue to put great emphasis on future housing needs and sensible increases to density. Victoria is fortunate to have some of Canada’s finest developer’s and home builders operating within its regional borders. Without new construction and significant increases to local inventory across all categories of housing, we will continue to experience upward pressure on pricing and increasing challenges to affordability. We need more housing and fewer barriers to sensible and thoughtful development.

Guest Contributor

Terry Stockus

250.588.7933 terry.stockus@theagencyre.com theagencyre.com

David Parry

250.634.8356 david.parry@theagencyre.com theagencyre.com

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 currently under contract. An independently owned and operated licensee of UMRO Realty Corp. © David Parry & Terry Stockus, 2022

Dan Miller

Miller Mortgages The Mortgage Group 250.858.8489 dan@millermortgages.com millermortgages.com