At a time when rising interest rates, growing re-sale listings and the psychology of a market under pressure are making an impact on Canadian real-estate sales, Victoria’s home prices are being buoyed thanks to a competitive and high-valued rental market.

 

That is the takeaway from one of Victoria’s top real-estate agents, who says he has observed noteworthy effects of red-hot rental demand on Greater Victoria’s residential property re-sale listings at a time when sales have slowed and sellers should theoretically be more amenable to cutting deals with buyers.

 

“From what I have seen this summer, since interest rates began to rise, is the balancing effect Victoria’s rentals appear to have on what could otherwise have been a much more turbulent residential re-sale environment,” Juras said, and continued:

 

“With rental rates being as high as they are, and competition for rentals as strong as it is, property owners looking to sell their investment assets are turning back to the rental market if their desired sale price is not achieved or their listing lingers, and we’re seeing this occur in greater frequency. This has kept the local market, I believe, from being exposed to a much higher volume of inventory, and therefore more competition among sellers, than what we’re currently seeing.”

 

Although the number of listings is higher than it was one year ago, availability remains significantly depressed at only around 2,000-units (combined residential and commercial properties) compared to the ten or 20 year averages, as most summers have historically seen over 3,500-units available for purchase in any given month.

 

For example, the number of properties for sale in Greater Victoria in August of 1996 was 3,556 residential and 879 commercial units, totalling 4,435-units. As of July, 2022, 2,162 combined units of residential and commercial listings were on the market. Ten years ago, in August of 2012, over 5,000-units were available.

 

“The expectation was that as soon as interest rates began to rise, we’d see a large influx of listings. And we have seen an increase, absolutely, but we need to put what we saw in 2020, 2021 and early 2022 into context, and that context is we were scraping the barrel in terms of housing supply back then, and we’re finally lifting out of that scenario today. But the rise, I think, is tempered in part due to the stability of rental income and the rental rates investors can achieve so sales are delayed for forgone for a longer period,” Juras said.

 

Juras notes that psychology plays a role when a market is in flux, meaning the prospect of falling prices and increasing inventory has many buyers sitting on the sidelines expecting future concessions and more choice, with a wait-and-see approach among many extending into this fall or spring of 2023.

 

“If you’re not in a rush to buy today, you do have the luxury of taking a back seat to the market and observing for a few months and into next year. On the flip side, with such a strong demand for rental homes, investors that might have been encouraged to sell now that we've receded from a price peak, are finding it amenable to continue renting their units rather than dropping prices to rush the sale of a real-estate asset.”

 

According to the Victoria Real-Estate Board, in July the average single-family-dwelling price in Greater Victoria slipped to $1.204 million over 254 sales from an all-time high in April at $1.427 million, and it broke below the 2021 annual average of $1.207 million. 172 condominiums sold in July for an average just above $598,000, and above the 2021 annual average of $562,254. Townhomes averaged $850,982 for the month compared to 2021’s $796,482 annual average. Total sales in July were 510.

 

The latest figures for average rents in Victoria show renters can expect to pay $1,600 to $2,000 for a one-bedroom apartment in high demand areas of the city, and $2,500 to $3,000 for a two-bedroom suite. C

 

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