Annual BC Assessment highlights factors impacting Greater Victoria market

Capital Daily recently reported on BC Assessment’s annual release on high end property values throughout the province. The numbers, from lowest to highest collectively point to broader social, economic and market trends going into 2025. Below we have some more context for the assessment release, looking at some of the contributing factors affecting housing prices in the CRD.

The Capital Regional District (CRD) housing market is largely impacted by demand for quality and affordable living, population growth, and general lifestyle preferences as more and more people flock to the region. There were 2,290 active listings for sale on the Victoria Real Estate Board Multiple Listing Service at the end of December 2024, a 7.4% increase from last year.

Population growth is a key factor

It's reflected in rising prices in suburban areas and the need for housing in general. Over the 2019-2038 period, the CRD projected its population to increase by 20%, from 412K to 494K. However, that estimate may be wildly conservative, given that recent numbers showed its population already at 453K in 2023. More people, more housing. But not all housing is created equal.

The combination of limited housing supply, rising interest rates, and high demand has kept property prices elevated, making home ownership challenging for many residents. This has intensified calls for more robust policies to increase housing stock, particularly for middle-income families and first-time buyers.

High demand for high-end properties

According to the Canadian Real Estate Association, another notable trend in the CRD is the sustained high demand for luxury properties, particularly in affluent neighbourhoods such as Oak Bay, Uplands and Fairfield in Victoria, as well as waterfront properties in North Saanich and Sidney. These areas appeal to affluent buyers, often retirees or international investors, drawn to Vancouver Island’s mild climate, natural beauty, and access to urban amenities.

Coined by British property manager Harold Samuel in 1944, the famous real estate catchphrase “Location, location, location” easily applies to the region’s relative abundance of exclusive oceanside residential properties. Ultra-high-value homes highlight the region’s appeal to affluent buyers and investors. The CRD is home to some of the province's most valuable among them. The price tag on James Island, a private island that includes a main residence, a number of guest homes and a golf course designed by Jack Nicklaus is $57.9M.

The property remains subject of a land claim by the Tsawout First Nation that claims it has never surrendered James Island or the title and rights guaranteed by an 1852 treaty.

A host of homes around Oak Bay sit around the $10M mark.

Slight dip in local home values

For buyers of more modest single-family homes in most municipalities in Greater Victoria the BC Assessment showed slight decrease of 1-5% in values, except for North Saanich which experienced a larger 5% decrease, lowering the average home price there from $1.4M to $1.3M million. Esquimalt experienced a slender 1% increase. The small fluctuations were not equal across housing types—Victoria’s condos values were down 3%.

Westshore still rising

Another prominent trend laid bare numerically by the Assessment is the rapid rise in interest in the region’s suburban markets, including Langford, Sooke, and Colwood. The West Shore offers slightly more affordable housing options compared to Victoria's core and attracts young families and professionals who are seeking both value and lifestyle options.

Green construction

Regional lawmakers are answering the rapid development trend with efforts to build green. OCPs from across the CRD and its Regional Blue/Green Spaces Strategy show that environmental sustainability has become a focal point in the region’s real estate and development landscape. Developers are increasingly incorporating green building practices and energy-efficient designs in response to consumer preferences and local government policies prioritizing environmental stewardship.

As of January 2024, several municipalities within the CRD have adopted the Zero Carbon Step Code (ZCSC) to enhance energy efficiency and reduce greenhouse gas emissions in new building constructions. The municipalities that have implemented the ZCSC include:

• City of Victoria
• District of Saanich
• City of Colwood
• District of Central Saanich
• Township of Esquimalt
• District of Oak Bay
• Town of View Royal

These municipalities have all taken significant steps to incorporate the ZCSC into their building regulations, aiming to achieve higher energy efficiency and lower carbon emissions in new constructions. The City of Victoria, the region’s earliest adapter, and the District of Saanich have enacted this incentive-driven environmental model within their jurisdictions. Additionally, the City of Colwood and the District of Central Saanich have moved to incentivize zero carbon construction in housing development.

These initiatives reflect a regional commitment to advancing sustainable building practices and reducing the carbon footprint of new developments. A recent pitch by Fortis BC representatives to Sooke council members reveals the industry giant’s unceasing campaign to keep natural gas options alive in new builds.

‍ Housing market investor dynamics

Overall, affordability remains the most pressing issue when it comes to housing in the region, even for investors.

One big concern for first time and local buyers has been the spectre of investor buyers in regional markets, particularly those from outside the province. Investors, but especially real estate investment trusts (REITs). REITS often outbid local buyers, driving up property prices. This dynamic creates challenges to housing affordability, especially for first-time homebuyers.

According to a Stats Canada Analysis, real estate investors purchased 25% of houses in BC between 2018 and 2020. Data referred to in Victoria  council’s June 2024 motion on vacancy control shows that investors now own a third of condominiums in British Columbia, which is noteworthy given that condominiums are a significant portion of new housing builds.”

Equity REITs make money by leasing units, whether apartments, condos or houses to tenants.

There is a growing concern about the REIT-ification of real estate across Canada. Canadian tax law currently exempts them from corporate taxes as long as profits are divided between investors and some tax loopholes continue to shield investors from paying income tax on their earnings.

Investment numbers have not grown in the CRD. The only municipality in BC that saw a significant short term increase in investor-owned properties increase since 2020 was Abbotsford. Victoria remains a city where investors have more modest investor profiles.

A 2024 Statistics Canada’s Housing Statistics Program report showed that resident investors represent 19% of buyers while newcomer buyers represent 37.2% of investors. An u pdated 2024 analysis shows that the number of investor buyers has risen to 25%. According to the program report, the majority of investor buyers in BC, including in Victoria, own modest portfolios of one to three properties. Approximately 70.5% owned only one or two properties, reflecting a focus on small-scale investment rather than large-scale accumulation. However, 5.9% of investors in Victoria held three or more properties, signalling a subset of high-volume investors who significantly impact the market.

These numbers reveal that investors generally paid more for properties than non-investors, with out-of-province buyers leading the pack. This trend underscores the appeal of Victoria’s real estate market to a broad spectrum of investors, including those from outside BC. But the trajectory of this type of investment isn’t as high as it is in other jurisdictions in the province— such as Vancouver, where investors hurried to close deals ahead of the increase in federal capital gains tax in June of last year. According to Altus Group’s most recent Canadian CRE Investment Trends Survey, Vancouver jumped from second to first place as the most preferred market by investors.

What began as a sharp acceleration of investment buying in Victoria beginning in 2022 has since dropped off in the last year.

A 2022 staff report on Victoria’s ­housing strategy, presented at council’s committee of the whole, showed that a massive increase in investment is increasing rental rates. “This trend has the ­potential to significantly affect ­affordability in Victoria’s rental housing market in the coming years, particularly where older, more affordable rental buildings are acquired,” the report said. That investment slowed after legislation banning short term rentals came into effect. Add to that, high borrowing rates and BC’s empty home and speculation taxes all lending to diminishing returns on condo values in the capital city as investments.

‍ Flipping penalties just came into effect ‍

Concerns over housing affordability in British Columbia, did lead the 42nd Parliament to introduce Bill 15 Residential Property (Short-Term Holding) Profit Tax Act which came into effect January 1, 2025 . The bill would see profits from flipped residential properties face a 20% tax rate if the residential property is sold within one year of acquisition but the legislation is more of a band-aid than a panacea for demand and affordability because it doesn’t reduce prices or stock availability.

‍ How Municipalities are Meeting Provincial Housing Targets

As of May 31, 2023, the BC government began to set housing targets in municipalities with the greatest need and highest projected population growth. Many municipalities in the CRD have responded successfully to the targets set for them through the Housing Supply Act. Victoria, Oak Bay and Saanich were included in the first round of quotas. Victoria exceeded its first annual target of 659 units within six months. Colwood, Esquimalt, Central Saanich, North Saanich, Sidney and View Royal were added to that list in April 2024.

Oak Bay fell well short of its 56-unit 2024 target, producing only 16 new builds. Housing minister Ravi Khalon currently has the situation in Oak Bay under review. In December he suggested he would give the municipality one month to demonstrate they had a clear pathway to meeting targets or he’d send an appointed advisor to help them get there. Mayor KevinMurdoch said Oak Bay would welcome an advisor and that he’d requested one from the province last year, but had been declined. Saanich also fell short of its housing targets last year but council says it has laid the groundwork to meet its targets in 2025. ‍

Immigration represents another key force in the housing market ‍

Newcomers to Canada are overrepresented among buyers compared to local population share in BC, highlighting the role of immigration in driving local demand for housing. According to a BC Immigration report, newcomer’s significant participation in the housing market highlights the  appeal of CRD and its importance, as a hub, for new Canadians. That trend may slow soon.

In November, the Royal Bank of Canada suggested “the drastic reduction in immigration targets announced by the federal government is one of the more consequential policy reversals in recent memory. It will sharply reduce growth in housing demand over the coming years, making it possible for Canada to narrow the housing supply gap.”

‍ Broader Housing Market Trends: Interest rates ‍

Modest changes in property values in Greater Victoria reflect a market shaped by fluctuating interest rates. The Bank of Canada (BoC) reduced its prime lending rate five times in 2023, ending the year at 3.25%, the lowest in two years. These adjustments could influence buyer behavior and, by extension, future property assessments.  The Bank says that 98% of property owners accept their assessments without review— but people who believe their valuations are inaccurate can file an appeal up to Jan. 31. ‍

Many local property taxes have leapt

‍ For many others, affording a home in the CRD remains beyond reach. The proposed 12.17% property tax hike for 2025–$235 for an average residential property– could put a strain on household budgets. Overall, the city’s real estate market resembles a microcosm of broader trends in Canada. From investor dynamics to fluctuating property values, the interplay of local policies and market forces continue to shape the region's housing future. That housing future in the CRD remains vulnerable to the impacts of housing investors, particularly in Victoria. ‍

Looking ahead ‍

Victoria’s proposed 12.17% property tax hike comes against a backdrop of those  relatively stable property assessments for 2025. However, the tax increase may also serve as a further check on speculative real estate investments, given the provincial government has made no move to do it themselves. Last April, Saanich announced a finalized property tax hike of 7.93%. The biggest tax hike came in Langford where council approved a whopping 15.63% increase over four years in its bid to abandon its long-established practice of using the amenity fund to offset tax increases.

While most residential property owners will see no change or slight decreases in assessed values, this tax increase could disproportionately impact investors and high-value-property owners will continue to influence housing market dynamics. The proposed property tax hike, coupled with high housing costs, could strain affordability for residents.