July 22 Market Update
Weekly numbers courtesy of the VREB.
|Wk 1||Wk 2||Wk 3||Wk 4|
|Sales to New Listings||48%||53%||59%||62%|
|Months of Inventory||4.0|
Another relatively busy last week with 181 sales, up from 165 the week before and only 136 in the first week of the month. That puts us at 8% ahead of the sales pace of last year, and if sales continue like this we might make almost 750 sales for the month which would be over the long run average of 720 for July. A little surprising to see this amount of activity in July when sales usually back off from June. Easing of the stress test rate combined with the lower fixed rates bringing some more buyers on board?
Last week I talked about the spec tax and possible impact on Victoria, which I concluded to be minimal at present. Another data point is the buyer origin data which was just released for the second quarter. Remember this data comes in response to the question “Where is the buyer currently residing?” so it is by no means a perfect measure of where buyers are coming from, but it is one that has been consistently applied over the years so we can get a sense of trends.
In the second quarter as in the first, out of town buyer numbers were down substantially (in Q2 down from the already lower Q2 2018), while local Victoria buyers picked up the buying slack, increasing their numbers over the same time last year.
We can also look at the survey of primary buyer motivations for some clues. Here are those results as they pertain to buyers interested in purchasing second (or third, fourth, etc) properties:
A couple things to take away from those numbers:
- Investor interest continues to decline. The doubling in the percentage of buyers that were purchasing investment properties indicates a level of speculation in the market that is brought out by rapid price appreciation. Remember sales were up substantially in 2016/17 as well so the number of investor buyers actually quadrupled in those years compared to the sleepy market of 2013 (despite rentals yields that had substantially deteriorated). What was the most effective curb to speculators? Not the spec tax, it was simply the fact that prices stopped increasing.
- Second home purchasing for vacation or future retirement continues to decline. The proportion of buyers motivated by purchasing a vacation home (1.23%) or future retirement home (2.58%) is now at the lowest point since data begins in 2010. While it seems natural to attribute that to the speculation tax which would hit some of those purchases, that proportion has actually been decreasing for a few years. I suspect price escalation again has more to do with it (fewer people able to afford it) than the speculation tax.
If there’s a small sales recovery underway, it seems it’s mostly driven by locals right now.
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