Analyst shrugs off housing market saturation fears

But poor resale numbers have piqued builders’ interest

Golden trowel in hand, Victoria Mayor Dean Fortin put the ceremonial finishing touch on a concrete wall at one of the city’s latest high-density developments.

At 14 storeys in the sky, Fortin smoothed the wet concrete atop the 834 on Johnson Street, saying, “This is the type of project we need to see more of.”

At 115 units, the 834 is just one in a series of high-density developments popping up in the region at a time when the numbers show a cooling housing market.

“It’s only been a few months that demand has been slow,” said Travis Archibald, senior market analyst for Vancouver Island, with the Canadian Mortgage and Housing Corp.

According to Victoria Real Estate Board numbers, the number of property sales in the region have been stagnant, if not slowing, as summer nears. Sales through the Multiple Listings Service were a low 339 in January, then picked up to 621 and 622 in February and March, respectively. They slipped back to 574 in April and 572 in May.

“We’re not that far below what we’ve seen (this decade), but we have seen increase in supply into the resale market,” Archibald said.

Archibald expects sales of new construction units to pick up, especially new builds that offer smaller units at lower prices.

Buyers in Greater Victoria are usually locals who are relocating, but meanwhile, migration will help support the number of new builds, he said.

“Builders and developers are building to cater to demand at a local level. You have to cater to the demographics that we’re seeing. That was one of the problems for a couple of years – we had a lot of buildup for the higher (end) stuff.”

Some developments have sold well, while others are slow. Dockside Green is currently 97 per cent sold, but there’s been no new construction since 2009. The Ovation has 28 of 78 units available and the Hudson has 46 of its 152 units still unoccupied.

By CMHC’s own numbers, buyers might not be keeping pace with the number of newly built units in the region.

The 10-year average for the number of unoccupied new units is about 213, but in March, there were 443 new units unoccupied.

“That’s not a cause of major concern,” Archibald said, adding net migration to the region is expected to be 5,300 in 2011.

“If you look at migration, it’s the key. That’s the fundamental link to what we’re going to need in the region in terms of homes so for that we’re looking at long-term demographic demand.”

Those sentiments were echoed by Fortin.

“Over the next 20 years, we’ll have 20,000 more people (in the city of Victoria),” he said.

“Frankly, we need healthy (housing) stock, which means we need more. This is how we create affordable housing.”

Fortin said current construction projects are catering to young families starting their careers in the region.

While the 834 is 90 per cent sold, developer Dave Chard said the supply-demand balance is on his mind, and the minds of other developers in Greater Victoria.

“Yes, we are looking at saturation,” he said. “The construction industry is going to look more at where they’re locating and where is their project quality.”

ecardone@vicnews.com