Across Canada, Real Estate Boards, including Greater Victoria’s, continue to use statistics selectively, to proclaim that the softened real estate sector is recovering from sluggish volume and price movements.
Is this really the case?
With respect to the national scene, some 50 per cent of the upswing in both sales volumes and price is accounted for solely by the activity in Greater Vancouver — which, heavily influenced by offshore buyers, seems to march to its own drummer.
Mortgage rates are clearly on a rising trend for the first time in years.
In the past three months, posted five-year rates have increased by 0.6 per cent, with the average mortgage in Canada now at 3.52 per cent.
As a result, we can expect the usual rush of buyers, particularly the first-timers, seeking pre-approval of mortgages while rates are still very low.
It usually takes a number of months for this group to clear the purchasing cycle.
The result is increased sales volumes and price support in the short term; however once this new-buyer interest passes, volume and price support both diminish.
Both Canada’s Minister of Finance and its banking regulator remain concerned about the overall, and increasing, indebtedness of Canadians.
This includes mortgage debt.
Should rising interest rates not sufficiently dampen the public’s enthusiasm for debt, a further tightening of mortgage lending regulations is clearly on the table.
With a sales-to-listing ratio of about 12 per cent in Greater Victoria, we are still well below the 15 per cent minimum at which a market is considered to be moving into balanced territory. As we move into fall and winter, we can also expect buying activity to abate.
Tellingly, August’s single-family home sale numbers dropped by 16.5 per cent, compared to July.
We should be pleased with the relative stability of the local real estate market — the result due in large part, to our attractive location in Canada, and our demographic, which includes a high ratio of retirees.
Notwithstanding the Real Estate Board’s enthusiasm about the vibrancy of our real estate market, those trying to sell their home in the next few months must recognize that buyers are still in the driver’s seat.
Sellers need to ensure that their pricing is truly competitive, rather than based on wishful thinking.
Failure to do so is likely to impede a successful and timely sale.
A retired corporate executive, enjoying post-retirement as an independent financial consultant, Peter Dolezal is the author of three books.
His books, including the most recent, The SMART CANADIAN WEALTH-BUILDER, are available online, and in bookstores.