Vancouver Island Real Estate Market Report 2025: What Buyers and Sellers Need to Know

Shanon Kelley Realty Group

Executive Summary

Vancouver Island’s real estate market in 2025 features significant regulatory changes, evolving mortgage rates, and new housing policies designed to increase affordability and supply. This report provides homeowners, buyers, sellers, and investors with key insights into the current landscape and upcoming changes that will shape the market through the remainder of 2025.

Key Market Highlights:

• Mortgage rates showing gradual decline with 5-year fixed rates ranging from 3.89% to 4.64%
• New BC Building Code enforcement as of March 10, 2025
• Provincial Short-Term Rental Registry launched May 1, 2025
• Home Flipping Tax now in effect with rates up to 20%
• Small-scale multi-unit housing zoning changes expanding development opportunities

Current Market Conditions

Interest Rate Environment

The mortgage landscape in June 2025 reflects a cautiously optimistic outlook with rates beginning to decline from their recent peaks:

Current Mortgage Rates (June 2025):

• 5-year Fixed (Special Offers): 3.89% – 3.99%
• 5-year Fixed (Standard): 4.24% – 4.64%
• 5-year Variable (Insured): 3.95% – 4.30%
• Bank of Canada Policy Rate: 2.75%

Market forecasts suggest continued gradual rate reductions, with most major banks expecting the policy rate to drop to 2.25%–2.50% by late 2025, contingent on inflation trends and economic stability.

Property Assessment Trends

2025 property assessments across Vancouver Island showed relatively stable values, with most homeowners experiencing changes between -5% to +5%. North Island communities saw higher increases due to strong demand, while urban centers like Nanaimo maintained steady valuations.

Policy Changes Ranked by Impact on Buyers and Sellers

1. BC Home Flipping Tax (HIGHEST IMPACT)

Timeline:

• Announced: February 22, 2024 (Provincial Budget)
• Effective Date: January 1, 2025

Policy Details:

• 20% tax rate for properties sold within the first year of purchase
• Graduated reduction in the second year
• Applies to all residential properties in BC

Impact on Buyers:

• Market activity may be affected by tax considerations
• Consult tax professionals regarding implications
• Market dynamics may favor end-user buyers

Impact on Sellers:

• Tax considerations may affect timing decisions
• Consult tax professionals for advice
• Market positioning may need adjustment

Potential Market Effects:

• Decreased speculative buying activity
• Longer average holding periods
• More predictable market conditions for primary residence buyers

2. Interest Rate Trends (HIGH IMPACT)

Current Situation:

• Bank of Canada policy rate at 2.75%
• Gradual decline expected through 2025
• Forecasted to reach 2.25%–2.50% by year-end

Impact on Buyers:

• Market conditions may improve with rate changes
• Consult with mortgage professionals for financing options
• Timing considerations for market entry

Impact on Sellers:

• Rate changes may influence buyer activity levels
• Market conditions may support various selling strategies
• Consider market timing with professional guidance

Potential Market Effects:

• Increased transaction volumes
• Price stabilization or modest growth
• Enhanced market liquidity

3. Short-Term Rental Registry (HIGH IMPACT)

Timeline:

• Announced: March 2024
• Registration Deadline: May 1, 2025
• Enforcement Start: June 1, 2025

Policy Details:

• Principal residence requirement with one secondary suite allowed
• Mandatory provincial registration with visible registration numbers
• Non-compliance results in platform removal and penalties

Impact on Buyers:

• More properties may return to long-term rental or sale market
• Reduced competition from short-term rental investors
• Potential for improved neighborhood stability

Impact on Sellers:

• Properties previously used for short-term rentals may enter market
• Reduced income potential may affect some property values
• Need to disclose short-term rental restrictions to buyers

Potential Market Effects:

• Increased rental housing supply
• Potential softening in vacation property demand
• Neighborhood character preservation

4. Small-Scale Multi-Unit Housing Zoning (MODERATE-HIGH IMPACT)

Timeline:

• Provincial Legislation: April 2024
• Municipal Implementation: Ongoing through 2024-2025

Policy Details:

• Allows triplexes and fourplexes on many single-family lots
• Streamlined approval processes
• Municipal adoption varies by community

Impact on Buyers:

• New housing types and options available
• Potential for more affordable housing choices
• Investment opportunities in multi-unit development

Impact on Sellers:

• Increased development potential may boost property values
• Larger buyer pool including developers and investors
• Higher and best use considerations for lot valuation

Potential Market Effects:

• Gradual increase in housing supply
• Neighborhood density changes
• New construction activity

5. Rent Increase Limitations (MODERATE IMPACT)

Timeline:

• Announced: September 11, 2024
• Effective Date: January 1, 2025

Policy Details:

• Maximum allowable increase: 3.0% (down from 3.5% in 2024)
• Minimum three months’ advance notice required

Impact on Buyers:

• More predictable rental costs if buying rental property
• Limited rental income growth affects investment calculations
• May influence decision between buying and renting

Impact on Sellers:

• Investment property values may be affected by income limitations
• Need to provide rental income projections to buyer-investors
• Long-term cash flow considerations

Potential Market Effects:

• Rental market stability
• Potential impact on investment property demand
• Tenant retention improvements

6. 2024 BC Building Code (MODERATE IMPACT)

Timeline:

• Announced: March 8, 2024
• Enforcement Date: March 10, 2025

Policy Details:

• Updated seismic design standards
• Enhanced accessibility and adaptability requirements
• Stricter bracing requirements for wind and earthquake resistance

Impact on Buyers:

• Higher construction standards for new homes
• Improved safety and accessibility features
• Potential for higher construction costs

Impact on Sellers:

• Newer properties built to higher standards may command premium
• Older properties may require updates for major renovations
• Renovation costs may increase due to new requirements

Potential Market Effects:

• Gradual improvement in building quality
• Increased construction costs
• Enhanced long-term property durability

7. Property Tax Changes (MODERATE IMPACT – LOCAL)

Nanaimo Example:

• Council Decision: December 2024
• Implementation: 2025 tax year
• Rate: 7.8% increase
• Payment Deadline: July 2, 2025

Impact on Buyers:

• Research municipal tax rates and payment schedules
• Factor ongoing costs into home buying decisions
• Consult financial advisors for budget planning

Impact on Sellers:

• Tax information should be disclosed to buyers
• Consider timing relative to municipal deadlines

Potential Market Effects:

• Localized impact on affordability
• Municipal budget improvements for services
• Possible influence on municipal property demand

8. Speculation and Vacancy Tax Expansion (LOWER IMPACT)

Status: Ongoing expansion to additional communities

Policy Details:

• Higher taxes on vacant homes
• Encourages active use or rental of properties
• Community-specific implementation

Impact on Buyers:

• Reduced competition from speculative vacant property holders
• More properties may enter active market
• Potential for improved neighborhood vitality

Impact on Sellers:

• Additional holding costs for vacant properties
• Incentive to sell or rent rather than hold vacant
• May affect investment property strategies

Potential Market Effects:

• Reduced vacancy rates
• Improved housing utilization
• Community-specific impacts

Regional Market Analysis

Nanaimo Market Conditions

• Property tax increase of 7.8% for 2025
• Stable assessment values with -5% to +5% changes
• Continued economic diversification supporting housing demand
• Average additional tax burden: $222 annually per household

North Island Communities

• Higher assessment increases due to strong demand
• Growing interest from buyers seeking more affordable options
• Infrastructure development supporting population growth

South Island Markets

• Continued strong demand near Victoria
• Short-term rental restrictions may increase long-term housing supply
• Transportation improvements enhancing connectivity

Market Outlook and Recommendations

For Home Buyers

Immediate Considerations:

1. Take advantage of declining interest rates for improved affordability
2. Research new zoning opportunities for potential multi-unit properties
3. Factor in municipal tax increases when calculating affordability
4. Consider timing purchases to benefit from reduced speculative competition

Long-Term Strategy:

• Focus on areas with good infrastructure and development potential
• Consider properties with legal suite potential under new zoning rules
• Evaluate total cost of ownership including evolving tax structures

For Home Sellers

Market Positioning:

1. Highlight any development potential under new zoning regulations
2. Provide clear information about rental restrictions and registration requirements
3. Consider timing relative to tax payment deadlines and market cycles
4. Ensure compliance with all disclosure requirements for investment properties

Pricing Strategy:

• Account for reduced speculative buyer activity in pricing expectations
• Emphasize long-term value and stability over quick appreciation
• Consider staging and presentation to appeal to end-users rather than flippers

For Investors

Strategy Adjustments:

1. Plan for longer hold periods due to flipping tax implications
2. Evaluate multi-unit development opportunities under new zoning
3. Ensure full compliance with short-term rental registration requirements
4. Factor rent increase limitations into cash flow projections

Risk Management:

• Diversify property types and locations
• Maintain adequate reserves for tax obligations and compliance costs
• Stay informed about evolving municipal regulations

Conclusion

Vancouver Island’s real estate market in 2025 presents both challenges and opportunities. The regulatory changes aim to create a more stable, sustainable housing market that serves residents while maintaining investment potential for long-term focused participants.

Success in this environment requires careful attention to compliance requirements, strategic timing of transactions, and adaptation to new market realities. The Shanon Kelley Realty Group helps clients navigate these changes with expert guidance and current market knowledge.

Key Takeaways:

• Policy changes favor long-term homeownership and investment strategies
• Interest rate declines are improving affordability conditions
• New development opportunities exist under evolving zoning regulations
• Compliance with new regulations is essential for all market participants

For personalized advice on how these changes affect your specific real estate goals, contact the The Shanon Kelley Realty Group for professional guidance tailored to your situation.

This report is prepared by The Shanon Kelley Realty Group based on information current as of June 2025. Given the rapidly evolving regulatory environment, readers should consult current municipal bylaws, provincial regulations, and qualified professionals before making real estate decisions.