Condominium values skyrocket amid tight supply

The lack of inventory and heavy demand for housing on Vancouver Island could result in some condominium and townhouse owners reeling from sticker shock when their 2018 property assessment arrives.

The hot Victoria real estate market has driven up home prices across all categories, but it’s the owners of strata units who can expect the biggest change in their assessments this year.

Tina Ireland, B.C. Assessment’s assessor for Greater Victoria, said the residential strata market has been “particularly robust” and assessments in that category have increased between 15 and 35 per cent.

“We gave any property owner whose increase was expected to be greater than average a letter [warning of the likely increase] in December, and a majority of those letters did go to strata owners,” said Ireland. “The market has been showing increased demand for that property type.

“It could be an affordability thing, as that product is generally more affordable than a singlefamily home, or it could be a desire for some people to live in a strata. But definitely the demand is there and that’s reflected in the sale prices and ultimately to the assessments.”

Assessment notices show the estimate of a property’s market value as of July 1, 2017, and its physical condition as of Oct. 31, 2017. The value is set based on factors including nearby sales, size, age, quality, condition, view and location.

In urban areas on the Island, condos and townhouses are expected to see an increase of between 15 and 35 per cent in their assessment, while in rural areas strata units should see an increase anywhere between zero and 30 per cent.

The most valuable assessed strata unit is 2101-83 Saghalie Rd., which was assessed at $8.1 million as of July 1, 2017. A year earlier, that unit in the Promontory in the Bayview development was assessed at $6.86 million.

Next in line is a neighbouring suite in Bayview One, 1006-100 Saghalie Rd., which is assessed at $6.07 million, an increase from $4.86 million a year earlier.

Assessment increases are expected across the board this year, with single family homes in urban areas seeing an increase of between 10 and 25 per cent, and commercial and light industrial land increasing by as much as 20 per cent compared with last year.

Ireland said the market has remained strong across the Island and offered few surprises.

Metchosin saw the largest average increase in assessment value, as the average assessment for a single-family home as of July 1, 2017, was $716,000, up 25 per cent from $574,000 in July 2016.

Langford saw the second highest increase, with the average single-family home’s assessment increasing 21 per cent to $551,000. Sidney’s average increase was 20 per cent, to $632,000.

The highest average singlefamily assessment in Greater Victoria was in Oak Bay, at $1.156 million, up from $1.036 million a year ago.

Those homeowners whose homes have increased in value are not necessarily facing a hike in property taxes. Ireland noted homeowners will see an increase in property taxes only if the assessed value change is greater than the norm.

New mortgage rules that came into effect Jan. 1 are likely behind the surge in home-buying activity toward the end of 2017, according to the Victoria Real Estate Board.

The rules, which require a stress test to ensure borrowers can withstand a jump in interest rates, fuelled strong sales last month as there were 462 property sales recorded in December following on the 671 sales recorded in November.

Ara Balabanian, president of the Victoria Real Estate Board, said those rule changes “may have pushed people into the market early.”

The result was a strong year for real estate overall, though it fell shy of the record-setting sales pace of 2016.

According to the board, there were 8,944 properties sold over the course of 2017 — 15.8 per cent fewer than the 10,622 sold in 2016.

“Early in 2017, we discussed how the Victoria area housing market would be different than the record-breaking year we had in 2016 and that, over the course of the year, we’d probably see a gradual return to a more balanced market,” Balabanian said.

“We did see evidence of this change come early in the year, as multiple offers and rapid price increases leveled out.

“However, the ongoing low inventory of properties for sale meant that buyers continued to experience competitive situations in high-demand areas, and multiple offers were still a common occurrence as buyers negotiated in a tighter market.”

There were just 1,384 active listings for sale at the end of December, a drop of 21.5 per cent compared with November and down 7.3 per cent from December 2016.

That is the lowest level of inventory for the region recorded in December since 1996, when the board started tracking that statistic.

“Overall, the low inventory and the continued interest in Victoria real estate meant that well-priced homes were quick to sell in 2017,” Balabanian said.

“Moving forward, we expect to see more inventory come into the market, which will continue to move us toward a more balanced state.

“We also expect housing prices to remain stable, without the increases we tracked in 2016, and anticipate steady slow growth.”

Beyond Greater Victoria, the rest of Vancouver Island saw a slight drop in sales activity over the course of 2017.

Despite a busy December, when 327 properties changed hands, there were 5,612 sales last year north of the Malahat Drive, a seven per cent decrease from the 6,059 recorded in 2016.

According to the Vancouver Island Real Estate Board, that decrease in sales reflects the market returning to more normal levels from the unprecedented sales activity generated in 2016.

It also reflects the lack of inventory as there were just 762 single-family homes on the market in December, the lowest number recorded since the board started tracking inventory levels in 1999.

The supply of condominiums and townhouses dropped by 13 per cent and 33 per cent, respectively.

Board president Janice Stromar said consumers are still motivated to buy.

“My advice to prospective sellers is not to delay listing their home until the spring,” she said.

“The VIREB area has been a sellers’ market for a long time, but we know that it cannot continue indefinitely.”

Last month, the benchmark price of a single-family home in the VIREB area reached $466,400, up 17 per cent from one year ago.

The benchmark price of a condominium last month rose to $284,400, up 28 per cent and the benchmark price of a townhouse hit $370,700, a 23 per cent increase from December 2016.