Victoria Fall Market Update
The Victoria real estate market is undergoing a slight change as the strong market continues into the fall. The average prices appear to have hit a peak as this summer experienced a small price drop for the first time in almost 2 years. The overall listing inventory has increased slightly in September compared to the previous month, when normally the inventory would decrease month to month until the end of the year. With the new mortgage rules announced today, and the potential increase in interest rates later this year, the result might be a more balanced market in 2018, and a slow down and possible decrease in prices into 2018.
The new mortgage rules “Stress Test” announced today, which are due to start on January 1, 2018, will have an effect of creating a short term buying spree between now and the end of December, as buyers that will lose some purchasing power with a lower mortgage qualification in January will need to make their home purchase prior to the new rules kicking in. This should create a busy fall market in Victoria, which is great if you are a seller. However, once the rules are enacted in the new year, the market may slow down and the result could be lower prices in 2018. Either way, it appears that the market frenzy of 2016 and parts of 2017 is winding down, and a more balanced market will be the result in 2018, which would be the desired outcome from these government changes.
The other factor to watch for is the Federal Governments policy on interest rates. Most are predicting another increase at the end of this year, and possibly another round of increases in 2018. This, coupled with the new mortgage rules announced today, could also create additional slow downs to the market in Victoria and across Canada into 2018. The proposed mortgage “Stress Test” will make it much harder for buyers to qualify for a mortgage at the amount they require to purchase in our high priced market in Victoria, as this new rule will lower the amount of a mortgage that a buyer can obtain. If a buyer is seeking a mortgage, and they have 20% or more down payment, they will now have to qualify at the greater of either 2% above the current best 5 year mortgage rate, or at the current 5 year posted bank rate. In other words, if the best 5 year rate is at 3.2%, and the posted rate is at 4.9%, then the buyer would have to qualify at 5.2%, even though they will still get the mortgage at 3.2%. These mortgage changes alone might produce a further slow down by yearend and into 2018.
Also, monthly sales have been lower in 2017 compared to 2016, so the potential for increased listing inventory is inevitable, further creating a market slowdown, with a more balanced market for buyers and sellers. This is actually a good thing. A lot of buyers have been frustrated with the lack of homes to view, and the panic to submit an offer right away, which has resulted in a lot of buyers staying out of the market for the time being. More listing inventory would bring these buyers back and keep the market moving at a good pace. This would also be good for sellers that want to repurchase in the same market.
Overall, the market should remain strong, but these above factors will definitely bring some changes to the overall market conditions, and the return to a more balanced market is most likely on its way. It is always hard to predict the future of the real estate markets, and even harder when the government enacts rules to alter the course of the market. It will be interesting to see what 2018 brings.
Here are a few links to various real estate sources that may be of interest to you:
1. Up-to-date real estate information on my Facebook page: VictoriaBCProperties
2. Latest Website Newsletter: Newsletter
3. Latest historical statistics from the Victoria Real Estate Board: VREBStatistics
4. Search for Victoria Properties at my website: www.DaleSheppard.com
Have a great rest of the year and I will touch base again in early 2018.