Canada's Housing Bubble

Aug 05, 2010 Carla Wilson Times Colonist

July sales in Greater Victoria down nearly 50 per cent from a year ago

A chill swept Greater Victoria's summer real estate market last month, as both the number of sales and average prices moved downward.

In July, 527 properties changed hands -- down 43.5 per cent from 933 sales during the same month in 2009, when a red-hot market blasted sales to the highest point in nearly 20 years.

The total value of all July sales through the Victoria Real Estate Board this year came in at $257,050,956, a fall of 40 per cent compared with $434,462,082 in July 2009.

Average prices for single-family houses, condominiums and townhouses all slid from their levels in June, the board said in its monthly report yesterday.

The average price for a single-family house in Greater Victoria was $615,004 in July, down from $649,280 the previous month. The median was stable at $560,000. The region had 16 sales of more than $1 million, including one on the Gulf Islands.

Condominium sales averaged $322,905 in July, down from $331,131 in June. The median slid to $289,900.

The average price of a townhouse was $420,578, down from $429,549 the month before. The median price declined to $388,000.

The inventory of homes for sale dropped to 4,477 in July from 4,730 in June, but that number was still 23 per cent higher than the 3,632 for sale in July 2009, the board said.

Real estate in the region has been volatile in recent years. Buyers have rushed to purchase and joined bidding wars, followed by a cooling-off period when the recession arrived.

Sales were slow at the start of 2009, building up to strong numbers as buyers ventured back into the market. But more recently, sales have been slowing and inventory rising.

In Victoria and most other B.C. markets, "we have seen consumer demand come off from the very high levels we experienced at the start of the year," Cameron Muir, chief economist for the B.C. Real Estate Association, said in an interview.

Factors include mortgage interest rate affordability, tighter rules for low-equity buyers and more fragile consumer confidence -- possibly influenced by the arrival of the harmonized sales tax in July, Muir said.

Muir said he anticipates that the average B.C. housing price will move up six per cent this year to $492,800, then dip slightly to $489,454 in 2011.

The Royal Bank of Canada and BMO each announced decreasing mortgage rates yesterday. BMO and RBC are each staging special offers of 4.19 per cent for a five-year closed mortgage rate.

Randi Masters, president of the Victoria Real Estate Board, described the first decade of the new millennium as "rocket years," with sales numbers and prices climbing repeatedly.

The capital region's market will become more balanced, similar to the late 1990s, she said. Sales will pick up, but "it is not going to be smoking hot like July of last year."

Spring is typically the season of Victoria's strongest housing market, when more homes are up for sale, gardens are blooming and buyers start shopping, Masters said. The spring market starts solidly in February. July, August and the beginning of September normally see some cooling off because people are on vacation. Winter months here are fairly active as well.

Casey Edge, executive officer of the Canadian Home Builders' Association -- Victoria, said builders and trades workers are busy right now.

Victoria and the West Coast are retirement destinations. And with one-third of the Canadian workforce expected to retire in the next 15 years, the long-term demand looks strong for housing in this region, he said.

July sales slumped for the area north of the Malahat as well. Single-family home sales decreased to 347, down by 35 per cent from 536 sales in July of 2009, the Vancouver Island Real Estate Board said. There were 415 sales in June 2010.

North of the Malahat, the average price of a single-family home dropped to $342,982 last month from $345,118 in June. July's median price was $323,000.

"July 2009 was a bit of an anomaly, having higher than normal sales volumes than that of previous year," VIREB president Cliff Moberg said.

"I think the misconception out there is that the HST applies to existing home sales, which it does not."

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