Vancouver Island continues to be one of the most desirable places to live in British Columbia. From the breathtaking scenery to the laid-back coastal lifestyle, this is a great city to call “home,” whether you are starting a family or easing into retirement. This explains why so many people are clamoring to get into the Vancouver Island housing market. But how feasible is it, given tightening market conditions?
The housing situation unfolding in the Vancouver Island real estate market is indeed a fascinating one. Supply is low, sales activity has stagnated, and prices are soaring. Local experts contend that sales would climb if inventory levels could support it, but prices would still remain elevated. In either case, it is tough for first-time homebuyers and young families to get off the sidelines and into the ultra-competitive Vancouver Island housing market.
The latest market snapshot confirms that Vancouver Island is desperate for new supply. But will the housing sector get that much-needed injection of homes? Unfortunately, the numbers suggest that it could be some time before we see any relief on the island.
Vancouver Island Housing Market Struggles with Historically Low Inventory
According to the Vancouver Island Real Estate Board (VIREB), residential sales activity tumbled in June compared to the same time a year ago. VIREB reported that sales of single-family detached properties fell 15 per cent, while condominium sales also declined seven per cent. But townhome transactions surged 29 per cent year-over-year in June.
Much like other parts of the British Columbia real estate market, Vancouver Island residential properties enjoyed upward movement in prices. VIREB data show that the benchmark price for single-family homes advanced at an annualized rate of 33 per cent to $732,700. In addition, condo units jumped 24 per cent year-over-year to $380,700, while townhouses also soared 32 per cent on an annual basis, to 564,000.
The biggest story coming out of the Vancouver Island housing sector has been tightening inventory. Active residential listings for single-family properties and townhomes plummeted 51 per cent from last year, and active condo listings plummeted by 60 per cent. The real estate association noted that it would need roughly 2,500 new listings to produce a balanced market.
While new residential construction is not a fast solution, it will address the lack of affordable housing in the long term. However, it is unclear if enough real estate projects are coming online, with housing starts slowing down in surrounding areas according to numbers from Canada Mortgage and Housing Corporation (CMHC). In Campbell River, there were 54 housing starts in the second quarter of 2021, down from 58 in Q2 of 2020. But Nanaimo housing starts more than tripled in August to 75, up from 21 last year.
“Unless demand drops significantly or more housing supply comes online through new construction, the needle for VIREB’s inventory situation will not move by much,” said VIREB president Ian Mackay in a news release. “BCREA, VIREB and other real estate boards continue advocating with policymakers at the provincial and regional levels to speed up the development process so that municipalities can expand supply more quickly to meet demand.”
What Should You Watch Out for in Q4 2021?
We are now in the home stretch of 2021, and it should be as raucous as the first nine months of the year. So, what should homeowners and homebuyers anticipate in both the Vancouver Island housing market and the broader British Columbia real estate market? Let’s take a look at some trends that may unfold in these final few months of 2021.
Residential transactions might be lackluster on Vancouver Island, but the CMHC figures show the annual pace of housing starts has slowed this summer. This could prove to be a strong indicator that demand will potentially outpace supply.
According to the Bank of Canada (BoC), interest rates will continue to stay low for the time being, and potentially into late next year. With the cost of borrowing remaining near all-time lows, this will continue to fuel demand by giving borrowers more money to expand their options in the costly housing market.
Over the next three years, there will also be fresh competition in both the real estate and rental markets. The federal government is poised to welcome approximately 400,000 immigrants per year through 2023, adding more pressure on an already tight housing market. As more newcomers enter Canada with their sights set on the residential market, it will drive up competition in many urban and suburban markets.
Canadians have a reason to be optimistic. The country is slowly emerging from the depths of the coronavirus pandemic. The economy is rebounding, the labour market is improving, and there is light at the end of the tunnel. This is great news for the housing sector, since it will raise homebuyers’ confidence levels and prompt them into the market. Supply is tight, but if Canadians survived the chaos and uncertainty of the last 18 months, they can endure anything that comes their way!