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Victoria Market - Outlook

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The recent weakness in the real estate market in Victoria is perhaps best viewed as a part of the normal real estate cycle. Victoria has enjoyed one of the strongest and most stable real estate markets in the country. The average sale price of a single family dwelling has increased from $8,795 in 1960 to $878,767 in 2019. Chart 5 shows: (i) the annual percentage change and (ii) the change in the average sale price from 1960 to 2019. The average sale price increased in forty-five of the fifty-nine year period and decreased in fourteen. In fact, there were only five years that experienced a decrease in the average sale price of greater than -2%: 1982 (-20%), 1984 (-6%), 1995 (-5.5%), 2011 (-2.6%) and 2019 (-3.1%). The average sale price of a single family dwelling has increased an average of about +9.1% per annum during this 59-year period, about +5.6% above the annual increase in the Consumer Price Index. Chart 5 also illustrates the cyclical nature of the real estate market in Victoria. There is an historic pattern of a sustained period of rising prices (i.e., 1961 - 1969, 1971 - 1981, 1986 - 1994, 2001 - 2007 and 2014 - 2018) that is followed by a period of flat or falling prices (i.e., 1970, 1982 - 1985, 1996 - 2000, 2008 - 2013 and 2019)

There are many factors affecting the real estate market in Victoria going forward. On one hand, Victoria continues to enjoy a strong economy, solid employment and population growth numbers and a stable and low-interest environment. Taken together, these factors should support a demand for housing. However, Victoria is an expensive market, which will dampen demand, particularly for higher-priced homes. On the other hand, supply is expected to increase with 2020, given the number of residential units under construction. It remains to be determined if the momentum evident in the last half of 2019 will continue into 2020. Overall, it is expected that we will see stronger market conditions in 2020. The British Columbia Real Estate Association (BCREA) is forecasting that residential sales in Victoria will increase about +4.8% in 2020 and that the average price for a residential property will increase a modest +1.0%. The CMHC is forecasting that Victoria will experience a stable real estate market in 2020 with residential sales about the same as in 2019. The
forecast figures provided by CMHC implies that the average sale price for a residential property in Victoria could fall within a range of between 0.0% and +13.0% in 2020 over 2019.