Strong demand is once again fueling multiple bids for attractive starter homes in Greater Victoria -- just as the Canadian Real Estate Association is predicting national records this year for average prices and sales.
Local buyers are shopping for homes in the $450,000 to $600,000 range, real estate agent Geoff McLean said yesterday. "When it comes on and it's well-priced, they are jumping on it."
Multiple offers are less frequent for properties priced above $600,000, he said. A good-quality basement suite can attract $1,000 per month in rent, so "suites are a big draw," McLean said.
The market is hotter now than it was this time last year, when sales slumped during the recession. But McLean said it isn't "as fast and furious as it was in 2007 and 2008."
Greater Victoria inventory is tighter these days and buyers are shopping now because they expect interest rates to rise later this year, McLean says.
The harmonized sales tax, coming into effect in July, is also spurring sales.
The province has announced that the threshold for the HST housing rebate will increase to $525,000, meaning most buyers of new homes will not pay more tax than they would have prior to the HST. But the rules are not understood by all would-be home buyers, said McLean, as the tax will not apply to existing homes.
Randi Masters, president of the Victoria Real Estate Board, said Greater Victoria has a balanced, steady market without too much, if any, pressure for higher prices.
"One exception is the upward pressure being seen on entry-level homes and homes with suites, or easy potential [for suites]." Some multiple offers are coming in that category, where first-time buyers are coming into the market because interest rates are low, she said.
House prices vary drastically within Canada. The average price of a single-family house in Victoria last month was $644,678, with a median of $595,000.
But the Windsor, Ont., housing market, for example, is very different. In the price range of up to $400,000, a total of 1,387 houses are listed on the Multiple Listing Service. The top of that category features newer executive-style homes, with multiple bedrooms and bathrooms. Compare that with the capital region where there are only 75 listings in that category, including mobile homes, and many out-of-town properties.
As Canada's housing market regains its feet, the idea of tightening mortgage-lending rules is being raised within the financial sector and government. The discussion centres on boosting minimum down payments to 10 per cent and restricting amortization periods to 25 years, as they once were. As it stands now, mortgage insurance is required from homebuyers borrowing more than 80 per cent of the value of their home from a financial institution covered by the federal Bank Act.
Today's rules require buyers to have a down payment of at least five per cent, and there's a 35-year amortization limit.
Bank of Canada governor Mark Carney has warned about rising levels of household debt, which is reaching record levels. Finance Minister Jim Flaherty has suggested he's prepared to tighten mortgage requirements.
"One of the legitimate concerns of the finance minister might be if you make qualifying for mortgage-default insurance prematurely restrictive that it will quell housing activity, even as erosion in affordability continues," said Gregory Klump, chief economist with the Canadian Real Estate Association.
Michael Holmes, managing broker for Pemberton Holmes in Victoria, said tighter mortgage rules would have some effect here, but he does not think it would be dramatic.
Greater Victoria's housing market is balanced and continues to attract retiring baby boomers, he said.
Nationally, housing resales and prices are predicted to hit record highs in 2010, said the Canadian Real Estate Association.
B.C. and Ontario are expected to be in the forefront in both average prices and number of sales because of low interest rates and eagerness to buy in the first six months of this year, before the HST is imposed on both provinces, the association said.
A national total of 527,300 sales are predicted for this year, up 13.3 per cent from last year. If that number is reached, it would top the previous record, set in 2007, by 1.2 per cent.
Canada's average home price is expected to climb by 5.4 per cent over last year, to a record $337,500.
Next year, both average prices and sales values likely will decline as interest rates increase and pent-up demand is absorbed, the association said.
cjwilson@tc.canwest.com
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