Last year, pent-up demand was the dominant theme in the Canadian real estate market. This year, supply seems to be all real estate agents, market analysts and consumers are talking about across the country, from the British Columbia housing market to Atlantic Canada. The Victoria real estate market is one Canada’s sizzling housing markets that is desperate for supply, with inventory levels trending near all-time lows. But, in an environment where demand is immense and borrowing costs are low, is there a short- or even mid-term fix?
One local real estate association head believes he has found an answer to the city’s supply problem: less “not in my backyard” and more “yes in my backyard!” While this might be a novel concept in many municipalities nationwide, it could be a simple solution to one of the most common issues facing Canada today. Until policymakers act, let’s explore the housing numbers and conditions on the ground this past summer.
Supply Shortages Stunt Activity in the Victoria Real Estate Market
According to the Victoria Real Estate Board (VREB), residential property sales tumbled 15.1% year-over-year in August and dipped 0.5% from the previous month.
The Victoria real estate market witnessed a boom in condominium transactions, while single-family homes slumped. In August, condo sales advanced at an annualized rate of 21.5%, while single-family home sales fell 9.8%.
Despite the slowdown in demand, prices continued to climb. The Home Price Index (HPI) benchmark price for a single-family home in Victoria surged 22.4% year-over-year in August to $1.089 million, which also represents a 0.7% jump from the previous month. Condo prices topped $540,000 in August after advancing 11.8% year-over-year.
Like other parts of the Canadian real estate market, the Victoria housing industry is witnessing a supply problem. According to VREB numbers, active listings declined 56.7% to 1,120 at the end of August.
But could relief for tight inventory be on the way? New data from Canada Mortgage and Housing Corporation (CMHC) reveals that housing starts soared to 572 in August, up from 224 in the previous year. In the first eight months of 2021, housing starts in the Victoria real estate market topped 3,000, compared to the 2,150 the same time a year ago.
“Year-over-year numbers might indicate a slowing of our market, but there are two important factors to consider,” said Victoria Real Estate Board President David Langlois in a news release.
“The first is that our market is starved for inventory. It should come as no surprise that with half the available inventory of last August, we sold fewer homes this August. Without the significant lack of inventory we’re experiencing, sales would most certainly have been comparable to, if not greater than, last August. The second factor is that the previous 10-year running average for sales in the month of August is 675 properties, so with 831 properties changing hands this August, it is clear that our market remains very robust, and that lack of supply is the biggest issue impacting attainability for our community.”
Would More Supply Ease the Tight Victoria Housing Market?
As Victoria real estate experiences significant low inventory levels, some real estate experts are coming up with their own proposals to reverse this trend, particularly in the post-pandemic economy.
The VREB believes that municipal officials need to speed up approval processes by slashing red tape and reducing delays, including allowing multi-family dwellings such as duplexes and triplexes in neighbourhoods that are historically single-family areas tucked neatly in uptown, midtown or downtown residential communities.
This, Langlois says, could lead to more housing, greater density, and perhaps even new real estate concepts.
“In terms of the way they look at how land is developed and treated, it’s taking on the idea that the single-family home preserve that occupies the vast majority of our land-base needs to be altered. That we need to allow for a mix of housing types in neighbourhoods that have traditionally been [for] single-family homes,” he said in an interview with The Times Colonist.
“That’s the future and the quicker we choose to embrace the future, the happier we will be,” Langlois added. “We need less NIMBY [not in my back yard] and more YIMBY [yes in my back yard].”
At a time when the entire Canadian real estate market needs new supply to satisfy current and future demand levels, every little bit would help ease the pressure on tight inventory in the Victoria real estate market, and beyond!