The Vancouver Island Real Estate Board is sounding the alarm about a lack of housing inventory that’s leading to sky-high prices on Vancouver Island.
In a media release, VIREB President Ian Mackay says that lack of inventory has reached a crisis point.
“Demand-side policies like taxes and higher mortgage rates have done little to remedy our inventory issue, which is a decade-old problem,” Mackay said. “Vancouver Island has always been popular with retirees, but COVID-19 and the option of remote work are now attracting younger buyers. Competition is fierce, and we don’t see that abating any time soon.”
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Housing prices on Vancouver Island have climbed significantly during the pandemic. Historically low interest rates, pent-up demand and working from home have buyers scouring the Island for available properties. The Island has always been popular among retirees from Alberta and Vancouver, but real estate agents are now seeing buyers from all over the country.
Across the VIREB area — which covers Campbell River to Mill Bay — prices are up. The benchmark price of a single-family home hit $631,500 last month, 18 percent higher than in March 2020. The benchmark price of an apartment reached $332,400, an increase of nine percent, while the benchmark price of a townhouse rose by 19 percent year over year, climbing to $487,100.
VIREB data shows that the median sale price for a single-family detached home in Ladysmith is $650,350. The median sale price for condos in Ladysmith has reached $250,000. And the median sale price for townhomes has reached $407,250.
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Zone 3 director for VIREB and real estate agent with Royal LePage Ladysmith, Susan Perrey, said the market is ‘crazy all around’.
“I had a mobile yesterday in a mobile home park that had six offers on it, going for substantially more than the asking price,” she said. “It’s craziness. There’s not a listing you get where you don’t turn around and say we’ll take offers within a couple of days after you list.”
Perrey said that VIREB is experiencing record-high sales and record-low inventory. She worries that buyers may be paying more than they can afford while interest rates are low.
“I do worry about when the interest rates start to come up. People are buying high-end properties. From January to March 31, we were the second-highest in the Cowichan Valley for unconditional sales,” she said.
Since January 1, 2021, 38 homes have been sold on unconditional offers in Ladysmith, second only to Mill Bay which saw 60 unconditional sales.
“It keeps me up at night. It scares me all the time. Just yesterday I lost out on an offer because I put a home inspection in,” Perrey said. “That was working for your buyer to make sure they were protected on an investment of $900,000 — why wouldn’t you put that in there?”
Perrey doubts that a tougher mortgage stress test would have any cooling effect on the market.
“I don’t think it’s going to affect retirees that are coming to the Island. I think the biggest effect is going to come to first-time buyers. It’s going to make it a lot harder for them to get approved and we’re going to see that fallout, which is really quite sad.”
In the face of a manic market, Perrey says that first-time buyers are getting disillusioned and some are leaving the market altogether.
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“Eventually everything will settle out, but unfortunately, for now, we’re still in this craziness.”
When the craziness stops, Perrey said that the market on the Island will remain steady, but some buyers who have purchased more than they can afford could be at risk of foreclosure.
“Right now we’re seeing an extraordinary amount of demand to live here on the Island, but if it does burst, there will still be people looking for foreclosures that come up.”
New developments are popping up throughout the VIREB area, but new supply is being snapped up almost as soon as it goes on the market. Although new developments are being built, the increased cost of building materials is forcing developers to sell units at a higher price.
President Mackay noted that increasing supply is not a short-term fix and called on the government to do more to increase supply.
“It’s painfully clear that attempts to dampen demand have not moderated home prices, so the best route to making housing more affordable, particularly for first-time buyers, is to increase supply,” Mackay said. “It’s not a quick solution, but it’s the only one that makes sense long-term. And, to do that, we need all levels of government working together.”