to buy, or not to buy ( yet ) Victoria hasn’t had this much inventory heading into the fall since 2015. Will buyers take advantage of this choice and the material savings from three Bank of Canada rate cuts, or wait for more cuts? The answer to that will define the fate of this fall market.
three rate cuts have resulted in a $42,000 increase in purchasing power (i.e., they can now buy a $612,000 condo with the same monthly payment). So why would anyone consider making a purchase this fall with so many more interest rate cuts on the horizon? The answer is inventory. With 2,527 active MLS listings across Greater Victoria at the end of August, buyers have not had this much choice heading into the fall since 2015 (when there were 2,792 listings). Put another way, total inventory is 25% above the prior 10-year August average (of 2,016), with condo inventory leading at 47% above average versus 18% for both townhomes and detached homes. That inventory won’t be around for long though. Real estate activity is very seasonal and we know from history that a combination of more sales and fewer new listings in the fall (as well as more de-listings) means that inventory will decline significantly between now and year-end. Over the past 10 years, that decline has ranged between 16% and 55% (the average is 36%). How would-be buyers weigh more inventory today versus more interest rate cuts tomorrow will ultimately define the fall market.
August is already a slow time for real estate activity in Greater Victoria, and given today’s challenging affordability conditions with high interest rates and elevated home prices, this past August was no different. There were 538 MLS sales in August, and though this was up for the second consecutive year (from 525 in August 2023 and 481 in 2022), it was still 22% below the prior 10-year August average (of 690). Outside of the past two years, you’d have to go back to 2012 to find a slower August. Keep in mind that the population of Greater Victoria has grown by about 90,000 residents since then (or about 25%), so in per-capita terms, sales this August were exceptionally slow. Rather than mull over the August that was not, perhaps the best use of this space is to discuss what might be coming in the months ahead. Real estate activity typically ramps up in the fall with kids back in school and summer holidays in the rearview mirror.
What’s different this year, however, is that buyers are heading into the fall market with some extra confidence courtesy of three 25-basis-point interest rate cuts by the Bank of Canada. It’s only been about two months since the Bank officially began easing rates, but the cumulative impact of the rate wind- down to-date is notable. For example, if we assume 20% down on a benchmark condo in the region priced at $570,000 (that is, a $456,000 mortgage) and a variable-rate insured mortgage at the prime rate minus 100 basis points, then each of the past three interest rate cuts has resulted in a decrease in monthly mortgage payments of about $70. All told, that’s roughly $2,500 in cumulative annual savings relative to just a few months ago. Alternatively, if we assume that our would-be buyer is comfortable making the roughly $3,000 monthly payment that they would have prior to the Bank of Canada’s first interest rate cut, then the past
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