In Sleepy Victoria, Canada, a Housing Market Wakes Up

The picturesque city of Victoria -- with its lively harbor and wooded roads -- is beset with home buyers.

The capital of British Columbia, Canada's westernmost province, has long attracted Canadian retirees looking for mild weather. In the past year, however, demand has been strengthened by buyers priced out of Vancouver and other Canadian cities, and by semi-retired professionals able to work remotely and who are seeking a laid-back lifestyle.

The median price of a Victoria home rose 15.5% to 587,086 Canadian dollars, or $436,008, in the first quarter of 2017 compared with the same period last year, according to real-estate brokerage Royal LePage. Inventory has plummeted. And Victoria's luxury market, which starts around $1.5 million, is booming. Between May 2016 and May 2017, 126 homes sold at or above that price; before 2015 these sales hovered between 20 and 40, said Fair Realty's Leo Spalteholz, who writes a blog about the Victoria market.

"In single-family homes, where we have our biggest crunch, there's just no land to build anymore," said Bill Ethier of Royal LePage Coast Capital Realty.

Lloyd and Suzie Anderson's hunt to find a waterfront equestrian property in Victoria took almost two years. After being outbid four times, Mrs. Anderson had taken to searching real-estate websites late at night. During one search, she spotted a listing that had gone up 15 minutes earlier. "We flew out the next day" from Ontario, said the 53-year-old retired teacher.

The couple's roughly $2 million offer was accepted, and in August 2015 they moved into the 6,144-square-foot, four-bedroom home. Down a steep, heated driveway, the house sits amid stands of cedars and bushy rhododendrons on the Satellite Channel. A backyard path zigzags down to the water, where the couple stores their kayaks out of reach of otters. A gym offers Mr. Anderson, 56, who partly retired from his Montreal-based aircraft-equipment repair company, the space to practice jujitsu.

One downside: There is no land for Mrs. Anderson's horse. So after a nearly $300,000 renovation, completed in May 2016, the couple is in contract to buy a home nearby with acreage for the horse for about $2.15 million. Their current home is listed with Deedrie Ballard of Re/Max Camosun for about $2.38 million.

In recent years, Canadian home prices have spiked thanks to low interest rates, a stable economy and overseas investment. Governments in British Columbia and Ontario have implemented a 15% foreign-buyer tax to cool the markets in Vancouver and Toronto.

Victoria, a collection of 13 municipalities with a total population of 367,770, lagged behind. A concentration of modestly paid government workers kept housing prices stable, and its small-town vibe and island location kept it off the radar of international buyers.

All this has turned Victoria into a comparative bargain. Vancouver's median home price was about double Victoria's, or roughly $876,000, in the first quarter, according to Royal LePage.

Victoria makes up a small, urban section of Vancouver Island, a 12,355-square-mile expanse of old-growth forest, mountain ranges, remote communities and vacation spots. Biking, hiking and other outdoor activities are popular pastimes. Deer are a common sight.

Residents extol their city's friendliness, contrasting its easygoing attitude with the hustle and bustle of Vancouver.

Victoria lacks some big-city amenities like high-end shopping and thriving nightlife. And the city is reachable only by air or boat. The Victoria International Airport has no direct flights to Europe, Asia or the eastern U.S.

The boom in Victoria real estate is visible in the glassy mansions sprouting in the coveted municipality of Oak Bay, which contains the Uplands, the city's most desirable neighborhood. On a recent drive, Jason Binab of Engel & Völkers Vancouver Island pointed out for-sale signs on stucco and shingle-style homes -- likely teardowns.

Some Oak Bay residents have resisted proposals to build taller condo buildings, preferring single-family homes in a traditional style.

"Change is slow in this particular neighborhood," said Mike Miller, president of Abstract Developments. The company is behind the first condo project approved -- after a seven-hour public hearing and three-hour debate -- in Oak Bay since 2003. Construction is set to start in the fall on the Bowker Collection, 43 single-level townhouses and apartments with prices starting at about $440,000.

Most of Victoria's luxury condos are located downtown near the Inner Harbour. One of the largest projects under way is Bayview Place, a nearly $750 million mixed-use development that will ultimately have 2,000 apartments spread over 20 acres, said Kenneth W. Mariash Sr., founder of master developer Focus Equities.

Victoria native Rob McAdams spent about $2.23 million building his five-bedroom house in 1993 and has since invested about $375,000 in upgrades. The house sits on 16.22 acres with 840 feet of frontage on Saanich Inlet. A totem pole stands in the great room.

Now semi-retired from land development, Mr. McAdams, 75, has listed the home for about $5.87 million with Royal LePage. He and his wife, Bette, 72, split their time between Victoria and Palm Desert, Calif., and the property is too large for them, he said.

(END) Dow Jones Newswires

June 22, 2017 16:24 ET (20:24 GMT)