I'm not sure what the true state of the rental market is here. September is always a stupid month because of the return of students; that skews everything and landlords get greedy as evidenced by the numerous articles in the TC about how difficult and expensive it has become to rent in Victoria. To be honest, I don't buy it. I don't think it is difficult, nor expensive to rent here. I think it is difficult to find a quality rental. But I don't think you pay much of a premium for that.
I'm not sure what historical rents are here. I don't know what price per square foot has been. But I'm guessing that plus or minus 20% of $1/SF is reasonable depending on what and where you are renting.
Case in point, here's a listing obviously aimed at students on the Uvic off-campus rental site. Three beds plus den, 1500SF $1500/month.
A quick perusal of craigslist.org doesn't show too much deviance from the $1/SF norm I'm suggesting. Anything that does typically includes utilities or offers "individual living" which I read as being only big enough for one.
Over at usedvictoria.com we see much of the same: places for rent, and prices that are not completely out of whack with incomes.
Yes it is not cheap, or really "affordable" to rent in Victoria. But rents have not even come close to keeping pace with the hyper-inflated prices being asked for condos and SFH in this town. In my observations renting is almost 50% less than owning a similar unit right now. Which means no one should be buying revenue properties with anything less than 100% down right now.
15 comments:
I think your right on track with the $1/sq-ft assessment. Mrs T and I are renting a 2000 sq-ft detached house in Oak Bay for almost 20% less than that a month.
Good deal? Yes!
Luck? Sort of...
Back in May not many were looking at this house. In fact, on showing day, only 5 couples arrived to view it --- despite it being listed ahead of time for over 1 month on UsedVictoria and the agents website. Of those 5 couples only two had approved applications when it came down acceptance.
I don't think that finding a place is that big a problem as long as your not looking for a 1st September move in.
Are rents cheaper elsewhere in the province? Sure, but that doesn't help those that are required to be in Victoria for school or work.
In the end my rent payment beats a house payment in Victoria any day. AND --- I can't wait until the first YOY decline of 5% (or more) ---- I'll be laughing all the way to the bank.
For me renting makes good economic sense. I have a small business in my home and I get to write off a percentage of the rent and utilities. In effect I am paying the same as a two bedroom apartment.
I know that you can do the same for a house. However, my accountant advised me against doing the same if I should buy a home. His explanation was that there could be some adverse tax affects upon selling the home.
Assuming $1500 rent for a 1500 sq ft home, I figure home "owners" throw away roughly 2 months worth of rent on property taxes that renters don't pay.
Then there's roughly $200/month in house maintenance costs - that's the equivalent of another month and a half of rental equivalent out the window. So homeowners toss 25% of their cash into the same pit as renters.
Ok, now add the cost of proprty purchase tax, closing costs and CHMC fees - say, $18,000 for a typical starter home in Victoria. That works out to $720/year for 25 years - more if you count the interest accrued if your banker decides to roll those costs into that 25+ year mortgage because you can't save your down payment fast enough.
There's another $15-20k sucked out of your pocket if you ever decide to sell the place.
I'm really not sure why renters are often porttrayed as a poor second cousin - it seems like a very reasonable fee for service to avoid the costs and burden of home "ownership" (ie renting from the bank).
The money saved by investing the difference between renting and buying (~$1000 in today's market), by my calculations as well as my Financial Advisor's, is a win for Victoria renters right now.
This is my first post on this blog....
I found this blog a couple weeks ago....and find it very interesting.
I think it would be a very tough time to be a first time home buyer right now, so understand the bearish tone.....
That said, I also have to disagree to some extent. I bought a fairly run-down smallish house in Fairfield in 2001....it was dirty, in bad repair, and overpriced at the time. It had been sitting on the market for months. The day we viewed it, the owners had substantially reduced the price (and still hadn't cleaned it up) We low balled the new lower price.....and bought it for 240k. Three years later, after we had worked put maybe 25k of materials and lots of my reno time into it....sold it for 480k. (Which at the time, was at thehigh pretty high end of theprice scale) We sold it ourselves, no Realtor.
We have done this many times in another BC interior city.
My point is, with careful shopping (buy low) and hard work (learn some reno skills) and carefull presentation and marketing (yourself), there is alot of money to be made on houses all, the time, not just in good markets. (my example was in a great stretch of the market, but I had done the same for 7 years PRIOR to the current boom market, and still made money when nobody else was doing this.
If you look at buying a home and living in it until you pay off your mortgage in 25 years, yeh , that sounds financially not very appealing to say the least, and renting sounds better.
I would buy in the current market in Victoria....just try and pick off the stragglers, the badly presented, under priced diamonds in the rough....and some value yourself, and you will be well ahead even if the market overall dropped 10-20 %.
2B
Where's the poll option for 'Rents are too high, but owning is worse.'? I rent about 1200sqft SxS at $1200/mo. So $1/sf is reasonable rough figure. It was a relatively tough find though (May) as most places were absolute garbage.
Intend to downsize, or move into a Coop if possible after the lease is up.
anon 7:50,
good one on you for that,always wanted to do that but the problem now is the diamonds in the rough are now fewer and far between.
The market is picked over for one and secondly how much risk are you taking on in todays market versus your previous times ? huge risk. And what kind of profit could you make on a run down bungalow off Burnside versus the cash outlay and borrowing costs and then taxes on the profit ? I would say it is not worth the risk at this point with prices clearly overvalued,mortgage rates going up,negative vibes and cooling off of the market.
What are you going to pay for a rundown house in Fairfield now ? $500,000 ?
Affordability is what its all about right now,who is going to buy that house you pump $25,000 into and then want to make another $50,000 on top of that to make it even worth your while ?
I say the market for the first time buyer product your targeting is dwindling right now and is the type of hot market many people like yourself have been burnt bad in the past trying to push the element to the bitter end, but is only my opinion.
HHV,
As I posted a week back,our 2 bed 1.5 bath apartment rents for $1000 a month but if we move out the new renters will be paying $1400,thats $400/40%increase in 3 years for a barely average apartment with 70's styling. I would say rents are going up big the last year because the tax bills went up.
I am sure you may find something cheaper but I would question the quality,especially seeing one bedroom places going for $1400 range too with half the space as here. You can't find those older bungalows for $1200 like you used to,they are all now $1600 range. Rents have clearly gone stupid for the average joe in my opinion.
It all depends on the landlord. Rents have shot up with some landlords because they need more, but family members of mine who are landlords charge below-market rent to get a lot of choice in tenants and pick the best and most deserving.
by "need more" above I meant they bought recently and/or are under other financial strain, and so try to squeeze the property for all it can possibly yield.
I'm certainly willing to accept that there are more people in town these days who are just out to get top dollar and enrich themselves - this is a byproduct of the hypergreed that has infected society alongside this property mania.
I know of two houses on nice streets in Gordon Head that have been rented in the last year, both 5-bed 3 baths, 2000SF plus and both for under $2000/month. The landlords (professional companies managing on their behalf) charge below market because people stay longer and they can be choosy about their tenants.
Its October now, and every 2 bedroom Im looking at that is acceptable is priced around 1400-1800 for about 900 square feet.
I dont know about you, but Im staying in my current 700 square feet apt at 755 per month and putting aside 1200 per month into direct investing on high risk as I am young and this is when we need to have growth.
"Anonymous said...
For me renting makes good economic sense. I have a small business in my home and I get to write off a percentage of the rent and utilities. In effect I am paying the same as a two bedroom apartment.
I know that you can do the same for a house. However, my accountant advised me against doing the same if I should buy a home. His explanation was that there could be some adverse tax affects upon selling the home.
October 11, 2007 8:54 PM"
I think your advisor was referring to the tax repercussions of depreciation, or CCA (capital cost allowance).
Whether you RENT or OWN, you may deduct the expenses on the portion of the home you use for business.
BUT, if you OWN, and you write off say 20% of the VALUE of the home as depreciation, that choice could come back to haunt you, in that if the house sells for more than you paid, the difference will be a capital gain, which is taxable.
We currently pay $850 for about 800 sq feet, with dw and insuite laundry, just outside the downtown core - not great neighbourhood, but convenient.
Our landlords just tried to raise our rent by $100, but we let them know that they can only raise the rent by $31 (3.7%) without applying to the tenancy branch and getting the extra increase approved, based on meeting certain criteria. I hope everyone who's currently renting realizes that this rule is in place. If you're an existing tenant, your landlord cannot raise the rent by more than 3.7% in 2008, after giving you written notice, thee months in advance. If you don't understand your rights as a tenant you should definitely check out the web site of the tenants rights action coalition, which is based in Vancouver, but provides services to everyone in BC via their website and a toll free hotline.
I rent 3 bed/2 bath home in Gordon Head for $1,300.
Interesting on Alberta Bubble Blog they note as house prices are decreasing, so are rents!
I rent a 2 bed/2 bath 1000sf condo and pay $892/month (just went up from $858). I don't plan on going ANYWHERE else for a long time. I will continue to wait for some sanity in this market.
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