From pent-up demand to falling inventory levels, the coronavirus pandemic has done little to impede activity within the Vancouver Island real estate market. Like the rest of the province, Vancouver Island’s real estate market defied all odds, soaring to new heights in the midst of a of public health crisis and economic downturn! It was an incredible year for the British Columbia real estate industry, and the early indicators point to another impressive year for both Vancouver Island and the broader province.
In the Vancouver Island housing sector, the demand is high, the number of homes for sale is limited, and interest rates are historically low. And this could be the norm for quite some time until new listings pop and construction projects get off the ground. That said, until then, price growth could soar in the area.
But just how strong is the Vancouver Island market? Let’s take a look at some of the most recent housing data.
Soaring Price Growth in Vancouver Island Real Estate Market
The most notable factor within Vancouver Island’s real estate market has been the shrinking supply. The housing sector closed out in 2020 with the lowest inventory on record, and it is unclear if there will be enough homes to satisfy demand at any point in 2021.
But how much did this impact prices?
According to the Vancouver Island Real Estate Board (VIREB), the benchmark price of a single-family home increased five per cent in December year-over-year to $546,900. Townhouse prices jumped by ten per cent from the same time in the previous year, while apartment valuations advanced four per cent to $312,000.
“Consumer demand is high, and buyers are snapping up well-priced properties quickly once they hit the market. Multiple offers are commonplace,” said VIREB president Kevin Reid in a news release. “Our current market conditions can be confusing and chaotic for buyers and sellers, but REALTORS® have specialized knowledge of their communities that can help streamline the process to ensure the best possible outcome while mitigating associated risks.”
In December, residential sales of single-family homes surged 34 per cent. Active listings of these detached properties fell 22 per cent to 421 in December, the lowest on record. There was also a 24 per cent drop in listings for condo apartments and a 17 per cent slide for townhouses.
The Drivers of the Vancouver Island Housing Boom
At the end of the day, the fundamentals are playing an important role in the Vancouver Island housing industry. A lot of people are relocating to the British Columbia town, putting pressure on available supply and creating a housing shortage. As a result, prices are spiking as demand continues to outweigh inventory – and this could be the trend for the rest of 2021.
The other crucial factor is that mortgage costs have never been lower. The Bank of Canada (BoC) has kept its benchmark interest rates near zero for about a year, making borrowing cheaper than it has ever been. This is giving homebuyers more options, searching for properties that provide them with a better bang for their buck.
These two ingredients could facilitate another record-breaking performance for the broader province this year. The B.C. Real Estate Association (BCREA) is forecasting a 16 per cent increase in real estate sales, citing record-low mortgage rates as the key driver of demand.
“After an unprecedented and often surprising performance in 2020, the provincial housing market is set up for a very strong year in 2021,” said Brendon Ogmundson, BCREA Chief Economist, in a statement. “A strong economic recovery and record-low mortgage rates will continue to drive strong demand this year.”
Despite all this optimism, another issue is bubbling beneath the surface: the rising cost of building materials. Homebuilders are sounding the alarm over the exponential increase in some products that industry leaders are calling “almost ridiculous.” What is costing more? Drywall, lumber, plumbing supplies, and so much more. This is already adding to the price-tag for homes, and the trend could lead to a wider problem in an already lucrative market.
Will Housing Prices Stabilize in 2021?
The key question is if housing prices will stabilize in 2021. Real estate agents realize that new listings need to come to market and new housing construction projects need to get started. According to the Canada Mortgage and Housing Corporation (CMHC), housing starts across the province of British Columbia have been on a downward trend, sliding nearly 19 per cent in 2020 from the previous year. Therefore, Vancouver Island Real Estate prices are projected to remain on an upward trajectory, joining the rest of British Columbia in being a red-hot real estate market.