Curious what average selling prices have been?

Sales may have slowed down a little when compared to the pent-up demand of last year following the price drop in the wake of the recession, but prices are still holding firm across the Victoria Real Estate Board.

There were 625 sales over the month of June, which is down from the near-record 946 sales in June 2009. Although this is also down a little from the May 2010 numbers, there is still plenty of activity on the Victoria market and a large inventory for buyers to choose from.

The big story has been the growing inventory as new listings continue to outpace sales. with a total of 4730 properties availble for sale at the end of June.

See the number of Active Listings and Total Sales

With the high inventory levels, many sellers are becoming frustrated with the length of time it takes to sell, especially if they were expecting to see multiple offers on the first day on market like we saw so often in the spring. Today’s market is very price sensitive, and those sellers that are unrealistic on their pricing will have a hard time generating any interest. There is a 42% sell/list ratio across the Victoria board, and with more than half of all people not being able to reach their goals, expect many to become discouraged and not relist their homes. When the johnny-come-lately’s realize that they are not going to quickly pawn off their house for a huge profit, many of these over-priced listings will disappear from the market and we should return to balanced market conditions.

The high inventory level has kept prices relatively stable and it seems we have reached a plateau. Historically, Victoria’s market goes through a 5-7 year alternating cycle of price increases followed by plateaus while the consumers’ purchasing power catches up. We’ve had our growth period and it looks like the plateau is here. Victoria will always remain one of Canada’s most desirable places to live, and as the baby boomer generation nears retirement age, the migration westward should keep our market fairly active compared to many other Canadian centers.

Victoria’s historic pricing cycle

We’ve been talking about it for a while now, and although the petition has been signed, the HST is implemented tomorrow. What does this mean for you? Well, nobody’s quite sure. Depending on how much Provincial sales tax was hidden in the current price, you may see some products increase in price, some decrease in price and some may have virtually no change.

One sector that will see an immediate increase in pricing is in New Home Construction. Where before, only 5% GST was added onto the sale price, now you will see a whopping 12%! Although it’s not quite that simple. Where there were rebates and tax benefits with the GST, the same thing applies to the HST with certain price levels getting maximum rebates or tax credits. I am not even going to try to explain all the different criteria that one must meet in order to achieve certain rebates, but know that the rebate maxes out at a sale price of $525,000. Anything over that is going to be subject to the remaining 12%.

The majority of confusion lies around properties that are only partially completed right now, where some of the property has been constructed with PST built into the price, and the remainder is completed under the HST. There are a number of rules and tables set aside to deal with these particular properties, and if you are purchasing a property that was started before July 1, but completed afterwards, you will want to talk to your lawyer or accountant about how to calculate the tax payable.

For the most part, if you are interested in purchasing new construction that is completed after July 1, the simplest solution is to include HST into the net price. This has two major benefits: 1) By writing the tax into the purchase price, it can now be financed and included as part of your mortgage payment instead of having to pay all the tax in a lump sum at completion. 2) Typically this deal would be written with all rebates and tax benefits going back to the developer, then they can deal with the headache and hassle of trying to figure out what to file. Just for the record, one law office confided that they have not even received the forms from the government that they would need to file an HST rebate yet. I guess the government is going to send them out on Canada Day?

 Look for a surge in nearly-new construction sales over the short term (where the tax has already been paid) until people get a little more comfortable with what the HST is going to mean to their everyday spending. In theory, as the PST is removed from construction costs, the developers will pass that savings on to the consumer, which should then counter-act the short-term price increase that we will see with the HST implementation. In theory. I guess we’ll have to wait and see.