Thursday, January 10, 2008


According to census data, just over 21,000 people moved to the CRD between 2001 and 2006.

According to BC Stats, just 11,776 new units of housing were created.

21,000 at 2.3/household would need about 9130 units of construction.

Two things we can assume then:
  1. 23 percent of new unit construction is aimed at owners that don't live here OR
  2. that 23 percent can be explained by the copious amount of single owner occupier units there are in this town
We know that approximately 40% of Victorians don't own the homes they live in, so is it fair to assume that the new unit construction would break down roughly the same?
Seems to me there are too many units, and too few owners, and too few immigrants, and two few... you get my meaning.

Are we overbuilt? If so, by how much? I see stats that say we have 7-9 months of inventory right now. Usually that's a buyers market. Is this a buyer's market? Sellers?

Update: H/T to Nick in comments for corrected math.


Nick said...

There's not enough data to conclude Victoria is overbuilt. 2.3people per dwelling is probably a national statistic, and Victoria could be quite different. Households divide (kids move out, people stop sharing apartments), people marry, divorce and die, and people from out of province buy condos to fit future retirement plans. The differential between in-migration and construction isn't high enough to say the market is overbuilt: 100% maybe so, but 23% (check your math) no necessarily.

Siobhan said...

I don't buy that Nick.

I think that this blog has consistently shown that there is an over supply of housing which has been fueled almost entirely by Victorians buying multiple properties not for the income stream that the property produces but for anticipated appreciation.

HouseHuntVictoria said...

The 2.3/per household is not a stat that I found anywhere, it's a number that I thought was a reasonable number given the amount of homes with suites, empty nester's and shared suites in apartments and condos.

I know of very few people who live alone in this town.

roger said...

The 2006 census stats have the people per dwelling numbers you are looking for. Other interesting stats are here

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hhv said...

I wasn't too far off Roger. I'm sure I've seen those stats on the CRD site before. Just too lazy to go digging today. Thank you.

Wompeter said...

I think the key is the outside investment in Victoria. I doubt that there are many people in Vic that are buying multiple houses and sitting on them for appreciation, that doesn't make sense. They'd at least rent them out to people moving here.

However, my aunt lives in the middle of the "Arizona Block" on Lands End Road. There are six houses in a row that are owned by Americans that come here for 3-6 months of the year. They don't count as residents or immigrants, but they ARE owners.

I have also heard figures as high as 75% outside ownership of Bear Mountain, which accounts for large amounts of the constructed units over the past couple of years.

I think condos are overbuilt... but houses are wayyyy underbuilt IMO.

Siobhan said...

Sorry Wompeter, I did not make myself clear.

I am not saying that Victorians are buying multiple properties and keeping them vacant. What I am trying to iterate is that Victorians are buying properties were the rental income does not cover their mortgage - Negative Cash Flow. Victorians are buying homes for the speculation of future appreciation not for the income that the property produces.

Nick said...


I doubt there are many (if any) Victoria "investors" who have purchased properties using a mortgage and are tolerating a negative monthly cash flow, hoping for a windfall capital gain in the future. Here is my reasoning: unlike in the US over the last few years, to get a mortgage in Canada you need proof of income to cover the payments. Most wage/salary earners would fail to qualify for $300K+ mortgages if their premise is to rent the subject property for hundreds or thousands per month less than the mortgage payment. I do think there are cash buyers (mostly from out of province) who buy condos and rent them to cover taxes and condo fees, but these people are parking money in the Victoria market as a hedge against future real estate inflation.

Siobhan said...

If you purchased a property for $300,000 in 2001 at 8% interest then three years later your property has appreciated by 50% to $450,000 and your interest rate has dropped to 4%. You re-mortgage your home and your payments have dropped in half.

You take the equity out of your home to buy a condominium or a second home. The rent on the condominium or second home does not cover the mortgage; however, since your home payment is half of what you have been used to paying you are willing to make up the short fall in the condominium or house rent for the anticipated increase in the condominium or home value.

The income from the condominium or second home increases the amount that you qualify for at the bank and your home equity is your down payment.

Or - you take out some of the equity out of your home and put a deposit down on a pre-construction building that will not be completed for a year or two in order to reap the benifit of future market appreciation.

And, if it worked once, it will work again. Your friends see your wizardry and they jump in too.

So Nick, there you have it -The Perfect Storm

Nick said...


It is well known that basic investor psychology leads people to avoid losses even if there is the possibility of offsetting gains in the future. That's why so many amateur investors end up buying high and selling low--they can't stomach the losses, even if a pro tells them "wait it out." Therefore, your scenario, while being plausible in theory, is unlikely in practice for the average joe mortgage holder. Ordinary people will not choose to lose real money month-to-month.

hhv said...


My dad, my best friend's parents and another friend's parents own 7 homes in Victoria between them. My best friend's parents paid cash for their second house which is in GH and is a 4 bed 2500 SF house that they rent for $1800/month. They paid $550K for the house 2 years ago. It is on a big piece of land right next door to their own home. They bought it to control who their neighbours are, not as an investment.

My dad is losing $1000/month on the second home he owns. He writes it off as a capital loss against the capitals gains in his other investments.

I can't say what the third couple is doing. They own three houses on Bear Mt, one they live in, I don't think they rent the other two, I think they are both on the market. They are looking for price appreciation.

Now I know these are anecdotal examples, but I don't think this is beyond the "norm" for this town at this time.

I think a lot of people are buying expecting 10% or more gains for at least the next few years. How will they feel when they don't get it?

Anonymous said...

I work with someone who bought a condo for "investment" purposes.

He is renting it out but the rent is not covering all the expenses so he is taking money out of his own pocket every month to cover them.

He even says the only thing he is looking at is the appreciation.

When I told what the projected appreciation was to be this year his eyes got wide and he stopped talking.

So, yes people are doing it. Poor suckers.


roger said...

Specu-vestor dreamer of the week listing

MLS 239502

Up for sale today at 519.9K
Purchased in July 2007 for 364.9K
BC Assessment was 420K (July 2007 market value)

Has it gone up 100K in 6 months? Is the market this hot for condos?

hhv said...

The more I think about it the more I realize how many people I know who have multiple properties and are taking losses on them. Ms. HHV's parents have owned 2 xtra places, rent wouldn't cover the mortgages, but they have sold 1 and the other hits the market soon. They will be ok due to appreciation but they've owned these for over 6 years.

Another friend just bought a rental property in Courtney. The rent covers the mortgage, they'll be out insurance, taxes and maintenance. They figure $400/month

Nick said...


"My dad is losing $1000/month on the second home he owns. He writes it off as a capital loss against the capitals gains in his other investments."

Nope, can't do that. The $1000/mo is not a capital loss. You get capital gains or losses when you sell something, not when you don't collect enough rent to pay the mortgage / tax / insurance / maintenance on a property. Also, my understanding of Revenue Canada rules is you can't use that loss to offset other regular income (e.g., salary) unless you can show that your rental business has the potential to be profitable in the forseeable future. If you are renting for less than your recurring costs, it would be tough to argue that it will magically become profitable in the forseeable future, and it would be quite obvious to Revenue Canada (from your detailed tax filing) that this is the case. Result: deduction of losses against other income will be denied.

What people are suggesting here runs contrary to a lot of long term evidence regarding joe-investor behaviour and his aversion to losses. I guess we'll have to agree to disagree.

Anonymous said...

That's the thing. In bubble psychology common sense goes right out the window.


Nick said...


That condo is in Shutters. It's a fair bet $365K was the pre-construction contract price. The question is, what are Shutters condos actually selling for now? Forget the assessment, those numbers always lag the market. Also, the listing claims this is the lowest price 2-bed for sale at Shutters. Since condos are very much like commodities (their only differentiator is price), perhaps the seller's $520K price is designed to get a quick sale. If it doesn't go fast, that means all the other sellers are in for a long wait or a big price drop.

Nick said...

Anon 11:11

Joe investor's aversion to losses (when future gains could outweigh them) is not common sense. It's often short-sighted and self defeating. That's not to say pouring cash into a money-losing rental business in the hope there will be a capital gain in the end is necessarily sensible. It all depends, and therein lies the dilemma.

What goes out the window in a bubble is the recognition of the relationship between risk and reward. Big rewards require big risks. In a bubble, people assume big rewards are a sure thing. They end up taking huge risks without acknowledging that's what they are doing. Then they get hurt when it turns out the payday isn't a sure thing.

hhv said...


I'm not sure of the tax implications. Everything is run through a business. I know that the impact of the $1000/month has the effect of him paying lower taxes.

While I agree that everything being discussed here goes against investment common sense, I can assure you that what we are seeing is very real and has a very real impact on the marketplace.

Anonymous said...

Interesting headline in the TimesColonist :
Costs stall Radius project

The article notes that the project is 50% sold ... the same number touted a month + ago in another TC article. The sold units sound like the "cheaper" ones @ 250K.

Speculation : the specuvestors have bought in (the previous TC article noted that 75% of the 50% were investor bought) and there is no significant high end market in Victoria for the more expensive units.

The high cost explanation sounds suspect as the "construction" so far seems to be digging a large whole plus a bit more refinement. They have hardly built 10 stories and then had to stop.

What trades would have gotten so much more expensive than budgeted/forecast since they broke ground ? They don't have much in the way of plumbers, electricians, dry-wallers working yet :-)

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hhv said...

anon at 5:36. Building costs aren't going up. They're actually coming down.

roger said...

On Friday 20 units in the Radius project were listed on MLS. I thought this was unusual for a pre-sale condo development until I saw Saturday's paper. According to the Vibrant Victoria site there is a two month hold in construction while they restructure their financing.

Fellow bears. I believe this project hold, following Tuscany Village's problems, shows that the slowdown crack is widening in the condo market. With predictions next year of moderate price increases the speculators will be reconsidering future condo purchases. The MSM has to report this stuff and it has an effect on the real estate market in general.

HHV said Building costs aren't going up. They're actually coming down.

I tend to disagree with you on this one. Perhaps building materials are going down but builing trade labour is in high demand. Workers are getting wage gains well in excess of inflation.

hhv said...


I don't believe that labour is anywhere near as tight as people make it out to be. Maybe highly specific types, but general carpenters and labourers are not getting huge wage increases.

Case in point: a friend of mine is having his kitchen re-done. He was told he'd have to wait 3 months. Kitchen Craft called him Friday to say they could come in a month early if he wanted.

Another friend of mine that I have written about before who owns his own contracting/capentry business hasn't had a call in two weeks and is starting to wonder what he's going to do next month when his current workload runs out.

He's good at what he does and charges a fair price. He thinks that the market price inflation slowdown is making people think twice about spending lots of money on renos. He states his wood based material costs are down 20% YOY from last January. Concrete is of course still high priced.

Another guy I know who is working on the Juliet downtown took 2 weeks off after Xmas. He's going back to work Monday. He says it was no problem getting time off as Farmer doesn't have any new starts coming up so there is no pressure to get things done in a hurry. They have work for the next 2 years between the Juliet, Uvic, and a few other smaller projects.

I know these are all anecdotal examples and aren't worth the paper they are not written on, but I don't buy the skyrocketing costs argument. It has always been that multi-unit construction broken down on a cost/SF basis is substantially cheaper than SFH on dollar/SF. SFH $/SF was up to $150 last summer. It's closer to $135/SF right now.

The Radius needs to restructure its costs because it now knows that they will have to build in sales price reductions in order to clear out the unsold units.

When specuvestors pre-buy from developers, they become competition when they sell at completion, it can lead to a very ugly situation for developers who need to sell and specuvestors who want to cut and run. The best case scenario is they forfeit their deposits which builds in a 20% cushion for the developer but they may still end up having to fire sale the units.

I think the condo market's collapse in Victoria, when it happens, will be the catalyst to burst the "it's always going to go up" psyche that exists here.

Homeowners will first dismiss it by blaming "greedy" developers for inflated prices, then they'll state no one wants to live in a condo anyway, then they'll wonder why their market value is less than their assessment and then they'll just resign themselves to having been duped by the shark-Realtors. Those that bought more than 12 years ago will say that reason has returned and they're glad they didn't sell and buy taking on more debt.

roger said...


That was a very informative post. It is the anecdotal stories and links to interesting articles which makes this blog helpful to those seeking a balance in the Victoria real estate picture.

Speaking of balanced articles - here is one from Moneysense magazine"
Are home prices peaking?

William Strange, a professor of urban economics and real estate at the University of Toronto, says the key factor for real estate forecasters to look at is affordability, which measures the percentage of our incomes that we spend on our homes. Affordability is vital, because when residents can no longer afford local homes, prices stop rising.

A lack of affordability led to the 1990 housing bust in Toronto. At that time, the average Torontonian with a detached bungalow was spending just over 60% of his income on housing. Right now, Torontonians are spending about 45% of their incomes on housing. In Vancouver, owners of detached bungalows spend an incredible 71% of their incomes on housing, while in Calgary they spend 45%, and in Edmonton 42%.

It’s hard to say how the boom will end, but history shows that after a big price run, homes can decline in value for a decade.

Anonymous said...


I guess the one piece of information that is always missing from the equations is the actual numbers.

If I am not mistaken those are not based on reality? As we know, the average income cannot afford the average detached home in Metro Vancouver. So, we still need to know what the income is of those who have purchased. IMO - 30% of 200,000 is a lot of money to play with. Not saying that everyone buying is 200k but to get into a home at these prices in Vancouver you have to be in the six figure mark or have a good down payment.

By no means am I saying the market should or should not go up or down but I always take this type of info with a grain of salt.

Larry said...

What would be REALLY telling is to somehow see equity statistics. Most people can't afford homes in Vancouver or Vic if they went in with minimum down....I have a feeling that most of this boom is driven by the equity of baby boomers, and the equity that the boom itself has generated for anyone who owned a house or houses, through some or all of this past ten years.


greg said...

Larry -

I would like to see how much equity was extracted to reinvest in 2nd 3rd 4th homes etc, which creates potential for a nasty domino effect if there is any downward pressure on this equity, people get burned.

vg said...

Maybe this will do it :

Credit crunch trickledown

Globe and Mail Update

January 14, 2008 at 3:12 PM EST

There will be “significant fallout” from a credit crunch throughout 2008, affecting everything from mergers and acquisitions in Canada to consumer purchases of big-ticket items, according to a business-trends report issued Monday by law firm Gowling Lafleur Henderson LLP.

“While it's perhaps too early to say definitively that we're headed toward a bust, tighter credit as a result of the credit crunch will surely impact on the economy,” the firm said in its annual Trendwatch publication.
On the micro level, it will be more difficult for consumers to obtain loans as well, Gowlings projected.

“With loans harder to obtain, people will hesitate to purchase items such as boats, cars, furniture and other big-ticket items.”

With job creation slowing down, credit standards constricting, housing values declining or stagnating and oil prices rising, “the consumer is definitely under pressure to stop spending and start paying down unprecedented levels of historic personal debt,” Gowlings said.

“It could well be a turbulent time ahead.”

vg said...

On an anecdotal note, I know of yet another young couple who have bid on a place for around $300,000 and have not only a second child in the oven, but the dad is a seasonal worker as well and they have been approved for the entire mortgage with NOTHING down.

Can you believe it ? the mortgage lender is not the bank but one of the usual desperation lenders but it blows me away to hear this is still happening when the shit is about to hit the fan. Something tells me there was some serious BS'ing going on with the application forms.

Anonymous said...

VG, I understand Coast Capital is still approving less than stellar candidates for mortgages under similar circumstances - no lying required.

Have any of you dealt with a mortgage broker lately? I was surprised with the amount of hyperbole they put in these applications on their own accord, never mind the applicant.

On my own applications, they were doing things like using the purchase price on vehicles, not the fair market value after depreciation, counting the value of my home contents (the list I use for insurance purposes). I doubt the bank wants my panini press for security. They considered pretty much every paid and unpaid job I've held since I was in junior high as valid work experience counting towards my 'years in current role/position'.

It was quite an eye opener.

olives said...

Coast Capital was a laughing stock for its advertising of ultra-lax lending standards on even American blogs a couple years ago. Can we make a bold prediction that it may not be around anymore 5 years from now - at least in its current form?

Aleks said...

That would be too bad. I like their no-fee checking.

Anonymous said...

That would indeed be too bad. I and my partner bank with them and have a ladder of term deposits with them (way under CDIC limits). I use them as well for the free chequing, and because of my general antipathy towards Canadian banks.

Anon @ 8:51: panini press?? Sweet! Though I agree the bank will likely not be able to use it as security.

Anonymous said...

Does anyone know if Island Savings is a candidate for failure due to lax lending practices. I have money there and wonder if I should take it out?

roger said...

Coast Capital is not covered by CDIC because it is a credit union.

The Credit Union Deposit Insurance Corporation of British Columbia, a government corporation, protects all British Columbia credit union depositors up to a maximum of $100,000.