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Real estate sales surging across Greater Victoria but risks lie ahead

Single family home prices jump nine per cent over past year while condo values remain stable
Low interest rates have acted as a catalyst for the pandemic real estate market. (THE CANADIAN PRESS/Graeme Roy)

“Maximum hotness.”

That is the phrase with which local real estate expert Leo Spalteholz describes the most recent sales figures at for the Victoria Real Estate Board (VREB) which spans Greater Victoria from Sooke to Sidney and the Gulf Islands. “If there’s one good bit of news for house hunters in the February (figures), it’s that the market didn’t get much hotter than it already was in January,” he said.

VREB realtors sold 863 properties — or an average of 21 per day — in February, 53.3 per cent more than the 563 properties sold in February 2020 and 33.6 per cent more than the previous month of January. Sales of single family homes were up 43.9 per cent from February 2020 with 390 sold, while sales of condominiums were up 65.7 per cent from February 2020 with 290 units sold.

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“The market remains incredibly hot no matter what segment you’re looking at,” said Spalteholz.

Factors for the current run on real estate in the area include low interest rates in the face of low supply.

“Our market remains one with tightly constrained inventory and high demand,” said David Langlois, VREB’s president. Not surprisingly, prices are pointing upward. A single family home in Victoria Core fetched $948,200 in February 2021 using the Home Price Index benchmark value as a measure, an increase of nine per cent compared to February 2020. The corresponding HPI for condominiums of $525,600 for February 2021 remained on par with February 2020 ($525,400).

“The good news is that we have seen some stabilization in listings and condo pricing between January and February, but we continue to see huge pressure on single family homes – new listings are snapped up as soon as they are listed,” said Langlois. “As a result, the pressure on single family homes continues to ramp up. There is significant competition for desirable homes – and in our marketplace most homes are desirable – and people competing for properties pushes prices up.”

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While good for sellers, Spalteholz’ analysis draws attention to the issue of affordability. “I believe that detached prices are facing increasing pressure from strained affordability and don’t have that much more room to run,” he said. “If they do run further it puts us into dangerous territory from an affordability standpoint and exposes us to a price correction.”

In other words, Spalteholz sees the current real estate market approaching its ceiling, with the come-down not necessarily pleasant.

Langlois said questions of inventory will dominate 2021 in recognizing the high cost of housing. “The theme for 2021 is going to be inventory – where does it come from and how much new supply can be approved, so that this situation does not persist,” he said.

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For Langlois, keys to moderating house prices include gentle density and building new homes, not what he calls “demand-suppression measures” like the foreign buyer tax, which “has changed nothing.” Failure of these measures to moderate housing prices has “only exacerbated the pressure on the supply” that was constrained 10 years ago but has now reached historically low levels, said Langlois.

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Wolf Depner

About the Author: Wolf Depner

I joined the national team with Black Press Media in 2023 from the Peninsula News Review, where I had reported on Vancouver Island's Saanich Peninsula since 2019.
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