Posted by Moishe Alexander
The Capital Region will experiences increases in existing home sales, and significant residential construction in 2010. Employment growth, continued migration, and low mortgage rates will contribute to the stabilization of Greater Victoria housing demand. After a slow 2008 and first quarter of 2009, lower home prices and low mortgage interest rates contributed to a significant rebound in resales in mid-2009. Expect both resales and average home prices to experience small increases in 2010.
Housing starts will bounce up in 2010, following two years of reduced levels of residential construction activity. The mid-2009 surge in resale activity combined with less supply (fewer homes under construction, and fewer existing and new homes for sale) will boost the number of new homes breaking ground in Greater Victoria next year.
Modest growth in existing home sales is projected for 2010, following a slight rebound in 2009. The growth will result from a stabilizing economy and continued sales by those looking to take advantage of low interest rates and ample, but shrinking supply. The recent up tick in resale prices (after bottoming out in the first quarter of 2009) combined with the anticipation of higher mortgage rates next year have led some potential home buyers to believe that Victoria-area homes will become more expensive. The favourable buying conditions will elevate sales through the remainder of 2009 and into 2010.
After six years of above average resale activity across the Capital region, a significant lull in existing home sales was observed in 2008 and through the first quarter of 2009. Since then, resale conditions have rebounded strongly due to relatively low mortgage rates and a downward adjustment in resale prices observed between the first quarter of 2008 and 2009.
The improved affordability that has been observed across Greater Victoria is evidenced by the reduced average mortgage payment that is required to purchase a home. In inflation- adjusted terms, the monthly payment associated with purchasing a single- detached home in Victoria declined 17 per cent between the peak of unaffordability (Q2 2008) and the August 2009 level.2
Affordability became a major issue for potential homebuyers during the extended upswing in resale prices that took place between 2001 and 2008. Over this period, the average resale home price in Greater Victoria increased at an average rate of 12 per cent per year. The recent improvements in affordability have been a breath of fresh air for those who previously could not afford home ownership, or were waiting for a more opportune time to enter the home ownership market.
A return to more balanced resale market conditions will occur in 2010, as both resale demand and supply stabilize. The strong demand recorded this summer has reduced the number of active MLS® listings considerably since reaching a peak last fall. As resale market demand stabilizes in 2010, so too will the supply of existing homes in Greater Victoria.
The fluctuations in existing home sales observed over the past two years have impacted average resale prices across the Capital region. After an extended period of steady and significant price gains, the average resale price declined 12 per cent from peak to trough in response to weak resale demand. Since bottoming out, the average Greater Victoria resale price has been edging up and currently sits three per cent below the peak level. With resale market conditions stabilizing, this will translate into minor price appreciation next year.
Tags: Affordability, Association, average, CONSTRUCTION, demand, employment, housing, increase, interest, Market, Moishe, Mortgage, ownership, project, record, Regional
Posted in British Columbia, CMHC, Canada