H/T to Captain Capitalism via Smalldeadanimals for the graphic.A while back, the media went gaga over a recent UBC/Sommerville study that contradicted a slightly less recent Merryl Lynch study regarding fundamental value in the national and local real estate markets. ML came up with 35% as their benchmark for targeted balance between what a house is worth based on what rents are. UBC came up with 11%. UBC used that bastion of accurate statistics, Craigslist, to determine what market rent in Vancouver is. ML, they used CMHC and StatsCan numbers (I believe, but may be mistaken here).
Things are changing fast and furious on the employment front for myself and the Mrs these days and we may be looking for a new place again. I started looking this weekend, not physically, but just online. I went and re-read the post over at Langley Financial Planning about how Mohican buys a house, and I completely agree with both his rationale and math. Is it possible to find a deal like this in Victoria today?
So here's a bit of a challenge to all the readers of this blog. Find me a condo, townhouse or a SFH with a suite, that I can realistically buy today (not necessarily asking price here, think lowball offers that may get accepted, target Tuscany Village, Reflections etc... places we know are struggling with sales and economics and can realistically throw low offers to). Benchmark these places against Craigslist's dreamland of market rents and lets make a deal. Keep 10-15% down, 25 year mortgage, price under $425K parameters in mind. I'll keep looking too and do up the math on your suggestions and grow this post over the next week or so.
UNIT COMPARISON #1
Here's the first one. It's a 2-bed 2-bath unit on the Gorge. I have no way of knowing if it is the same unit for sale as for rent, so this isn't exactly accurate science here folks, but close enough for a comparison non?
Craigslist ad: rent at $1295 plus hydro.
MLS # 247947: currently for sale at $245K after 107 DOM (original price $264,500) incidentally, it's neighbour is also for sale at $259,900 after 119 DOM and original price of $279K.
Here are the numbers: Rent = $1295 per month. Ownership costs = (10% down mortgage, 5.25% over 25 years = $1315 per month) + $173 strata fees + $95 property taxes = $1583 per month.
Price to rent ratio is 189 (funny how it mirrors the graph above eh?). Monthly payment difference is 19%.
Can we make it smaller? This seller, according to my PCS account, is "motivated". That means make an offer. So I go in and offer a whopping 15% off the price, which is about $210K. We agree on $215K. I redo the numbers as: $1135 mortgage + other expenses = $1403/month for
Price to rent of 166, and monthly payment difference of 8%.
There are two problems with this scenario: 1. I think $1295/month for a Gorge Rd condo at Tillicum is inflated compared to market rent, probably by as much as 15%/month; and 2. I don't think that a seller that isn't in distress, and is just "motivated" at this stage would be willing to consider an offer that is almost 20% lower than their original asking price. I could be wrong, but even if I am, I'm still overpaying for this property.
When I do up numbers like this, it really hits home for me just how far out of whack this market has gotten, and how far it needs to fall to return to a balanced state. So when you read the local real estate pumpers punditry that this market has returned to "balanced", remember they aren't speaking of market fundamentals, they're speaking of buyers vs sellers, and they're wrong anyway, because clearly, it's a definite buyer's market.
Things are changing fast and furious on the employment front for myself and the Mrs these days and we may be looking for a new place again. I started looking this weekend, not physically, but just online. I went and re-read the post over at Langley Financial Planning about how Mohican buys a house, and I completely agree with both his rationale and math. Is it possible to find a deal like this in Victoria today?
So here's a bit of a challenge to all the readers of this blog. Find me a condo, townhouse or a SFH with a suite, that I can realistically buy today (not necessarily asking price here, think lowball offers that may get accepted, target Tuscany Village, Reflections etc... places we know are struggling with sales and economics and can realistically throw low offers to). Benchmark these places against Craigslist's dreamland of market rents and lets make a deal. Keep 10-15% down, 25 year mortgage, price under $425K parameters in mind. I'll keep looking too and do up the math on your suggestions and grow this post over the next week or so.
UNIT COMPARISON #1
Here's the first one. It's a 2-bed 2-bath unit on the Gorge. I have no way of knowing if it is the same unit for sale as for rent, so this isn't exactly accurate science here folks, but close enough for a comparison non?
Craigslist ad: rent at $1295 plus hydro.
MLS # 247947: currently for sale at $245K after 107 DOM (original price $264,500) incidentally, it's neighbour is also for sale at $259,900 after 119 DOM and original price of $279K.
Here are the numbers: Rent = $1295 per month. Ownership costs = (10% down mortgage, 5.25% over 25 years = $1315 per month) + $173 strata fees + $95 property taxes = $1583 per month.
Price to rent ratio is 189 (funny how it mirrors the graph above eh?). Monthly payment difference is 19%.
Can we make it smaller? This seller, according to my PCS account, is "motivated". That means make an offer. So I go in and offer a whopping 15% off the price, which is about $210K. We agree on $215K. I redo the numbers as: $1135 mortgage + other expenses = $1403/month for
Price to rent of 166, and monthly payment difference of 8%.
There are two problems with this scenario: 1. I think $1295/month for a Gorge Rd condo at Tillicum is inflated compared to market rent, probably by as much as 15%/month; and 2. I don't think that a seller that isn't in distress, and is just "motivated" at this stage would be willing to consider an offer that is almost 20% lower than their original asking price. I could be wrong, but even if I am, I'm still overpaying for this property.
When I do up numbers like this, it really hits home for me just how far out of whack this market has gotten, and how far it needs to fall to return to a balanced state. So when you read the local real estate pumpers punditry that this market has returned to "balanced", remember they aren't speaking of market fundamentals, they're speaking of buyers vs sellers, and they're wrong anyway, because clearly, it's a definite buyer's market.
78 comments:
I was talking to a fellow earlier last week from Toronto who was quite surprised at our home prices - he said they are as high as Toronto! He then followed it up to say, "of course, you can't rent a two bedroom suite under $1,800 per month either."
I haven't researched this but I definitely expect to see additional balancing over the next couple years.
So, if Mohican leaps from a mountain-top, will you do the same?
PLEASE be patient.It only gets better from here on.
Hi HHV,
You said: "Things are changing fast and furious on the employment front for myself and the Mrs these days and we may be looking for a new place again."
Yes, and I hope you mean for the better. It must be if you are contemplating buying?
I can empathise to some extent (the career change part, not the buying), in the sense that things have very recently changed for my wife and I. My office moved to another part of town and my wife is looking to change careers and has quit her job and started taking classes in a training school, also in another part of town.
This means one less income at my home for at least 1 year, maybe 2, though we still have a savings rate above 50% per month on my income alone (neither one of us are "spenders", though I do get my Starbucks almost daily - for now), and so in short, we're moving next month.
SHARING MINE AND MY MOTHER'S RECENT RENTAL SEARCH EXPERIENCE
I have as a result, been furiously looking at the rental market recently for about 3 weeks, almost daily, and 2 weeks before that one of my mother also needed to move, and so I spent a couple of weeks looking for places to help her, including seeing apartments... and so ...
Here's my rental-search report from the trenches:
1. Rental House Search sources:
- Victoria Craigslist
- Uvic Off-Campus Housing
- UsedVictoria.com
- Saturday Times Colonist newspaper (as much as it pains me to give them my '$2' to help them support RE pumping)costs)
MY MOM's CRITERIA:
- 1 Bedroom apartment with above average living room space (she has LOTS of crap.. I mean furniture)
- Price range: Under $1,000/mo all inclusive.
- Large windows, or lots of them, and specifically with lots of sunshine
- Not too far from where she was living and close to some of her friends
- Parking for 1 car.
MY CRITERIA:
- 1 Bedroom in a house (I can't stand apartment living)
- Price range maxing at $1250 + maybe $50 in utils, so $1300/mo tops.
- Closer to my work & my wife's new school (the #1 reason for us to move)
- Large bedroom that would fit a king size bed and night tables and other large bedroom furniture
- House *must* be well insulated and warm as my wife is always feeling cold.
- Wood flooring or short & new carpets (to minimize allergies)
- Above average sized kitchen (my wife loves to cook)
- Sufficient storage space (we need slightly above average)
- Close to a bus stop so my wife can take bus to school.
- No Oil heating, unless the landlord pays 100% for the heating costs.
- Parking for 1 car
Rental Search experience for my mom:
With a price range under $1000/month, with a couple of exceptions, nearly everything she was looking at was apartments in large rental apartment complexes (Brown Brothers style).
This search was for a rental place on Sept 1st, 2008 - the most insane month of the year. Fortunately for me, my mom isn't too picky, and is a very emotional person when it comes to finding a home, and also she is very impatient - all of which makes for a relatively short period of searching.
I won't detail what we saw at each place we went to, but I can average out for you what was seen... As expected, each apartment place required scheduled viewings, and when we showed up we were usually viewing the place at the same time as 2 or 3 other couples. When we finished viewing, if interested, we would sign an application form and as we did that, 10+ more couples or individuals would be seen going through the apartment tour, and I would say 7/10 roughly would also proceed to fill out the application for the same 1 bedroom apartment.
I clued in to what was happening pretty quickly, and told my mom that for the next apartment we look at, I want her to have in her hand the following:
WHAT TO HAVE ON HAND FOR EACH LOCATION:
1) Letter of reference from work, stating anual income and years of work, and that employment is expected to continue.
2) Letter of reference from any previous recent landlords with as many positives as possible.
3) Letter of reference from the bank stating that your credit is good, ideally that you don't have any debts, and if you don't mind, disclosing your total savings (though this is not for everyone, but makes the landlords a lot more comfortable).
4) Measuring tape to make sure that all your furniture is going to fit
5) Nice looking, clean clothes. Dressing up makes a big difference, though don't over do it. I was shocked at how 'grundge' some of the younger people looked like. It would make the average landlord decide in their heads "no" before the "hello" exchanges are even done.
6) Being on time for your appointment. I would actually suggest being there 15 minutes before. That did, in several cases make my mom the FIRST person to view the place.
Armed with all this, we went at it again. Given my mom's age (very close to retirement), and letters from employers stating she worked there for more than 15 years, no debts in bank, and the fact that she looked very well dressed and perhaps most importantly was very courteous, polite and social in a positive way (charisma), she actually ended up with 3 offers the next day. At each location she must have beat out an average of 10 to 20 other candidates.
The only one she wanted though she did not get as it was given by another tenant already in the building that wanted to move within the building.
Eventually, a friend of my mom's in another apartment building knew that their next door neighbour was going to move and my mom with her charisma chatted up the landlord who actually committed to her before even advertising the place or seeing any other candidates. So in my mom's case, it was a "who you know" kind of a deal that made her end up with an all inclusive large apartment meeting ALL her criteria for $830/month! Parking included.
At the peak of insanity in looking for a place for Sept 1st, we went as far as offering $50/month more to the landlord's asking price, and stating that we would be willing to pre-pay the first 6 months.
MY SEARCH:
I began my search well armed with an idea of what was going on in the rental market, and had printed and signed references in nice envelopes from day 1.
My first dissapointment was how few places there were to look at within my price range that didn't look (online pictures) or sound disgusting (text description).
The very first ad I responded to actually turned out to be one of those Craigslist Scams... Doh!! Too good to be true I guess. I was surprised at how the ad sounded so realistic. I imagine they just copy/pasted an older ad from a couple of months back and shaved off $200 off the price to attract maximum victims. The reply to my email showing interest was plenty obvious it was a scam though. It had every teltale sign, including that the landlord was travelling in Nigeria. You'd think these scammers by now would clue in to at least not include the words "Nigeria" or "Africa" in their emails.
I actually took things up a notch and scanned my references, and emailed them immediately to each landlord that we wanted to view the property. Given my high income and great references, every single landlord - of the ones that actually replied, wanted to have us see the place.
That leads me into the next point. I would say on average maybe 3 out of 10 landlords actually bothered to call or reply back. I must have sent 50 emails with attached references in the course of 3 weeks.
I believe the reason many didn't reply was because we were so picky in our needs that the houses didn't match our requirements, so why bother.
MY CHALLENGES FACED:
The number 1 problem I encountered was that 7/10 places could not comfortably fit a king size bed + 2 night tables and a chest of drawers in the master bedroom. I actually looked at some 2 bedroom places as well.
The number 2 problem was that the total living square footage was much smaller than we were hoping for.
The number 3 problem was that the quality of the living space sucked for the most part (must be something to do with our price range). The kitchens looked outdated, the living rooms were either tiny or also looking like relics in many cases, some closets in the houses didn't even have doors (WTF is up with that?!), many bedrooms didn't have much space for hanging the clothes of 2 people, etc.
The number 4 problem, while minor, was that in many houses the landlords wanted us to deal with the garden, front and back, and my wife and I are so busy in our lives we don't have time nor interest in this.
I should say that in the $1100 - $1200 range there's a lot less people, but still a good 5+ to compete with in a single day of viewings.
WHAT WE RENTED:
Fortunately, for my wife and I, we had time on our side and had agreed that we would move only when we found a place that met most of our criteria.
This worked well, because while most places were a clear "NO WAY!!", we did find one gem.
For less than $1000/month all inclusive we found a waterfront property (I kid you not! This was not "water view", it was water front as in walk outside the back yard that leads into the ocean) bottom part of the house that was close to town with a bus stop less than 200 meters distance, that would fit our King sized bed, had wooden floors, was warm, even cable and internet were included... anyway it matched pretty much ALL our criteria except that the kitchen wasn't as large as we had hoped, but I think we can make it work.
So there you have it. Reporting from the trenches on the current rental market.
Anon at 7:43. Wow. Thanks for the details. You've pretty much confirmed my thoughts on the whole rental process. I've always been pretty lucky/good at getting places as I've got a good network in the local real estate/rental market.
For the record. I'm not buying right now. Not even if we find a place that fits the rent/price fundamentals. Personally, I believe rents in this town are bubbly too, and that as this whole over supply thing plays out, rents will balance again too. Not by much, but it seems crazy right now what all these would be trumps are trying to get for their dumpy one bed suites.
The point of this post was to try to create a real world application of Sommerville's thesis. Can we make it happen?
I've been in the same place for 3 years now, 950 a month, 2 bedrooms in a great area and pets allowed. I would love to buy a house and would be willing to pay a premium to own a house, but I'm looking at least at doubling my monthly payments PLUS tossing my entire savings into a home, just to get an extra bedroom out of the deal. I would love to buy in order to get started paying off a mortgage, the longer I wait, the older I get before I pay that mortgage off. However, I cannot justify the extra payments at this point.
Part of my hesitation is also in the economy and my career, I have doubled my income in the past 4 years since graduation from university. While I don't expect that trend to continue, I do expect that all things being equal, in another 2 years I'll be making a decent chunk more than I am now. However, given the uncertainty in the economy, I also might also be unemployed and taking the plunge into buying a home at this time seems risky.
Maybe I should just say screw it, take on a giant mortgage and hope for a federal bailout in a couple of years. Worked for Wall Street, no? :)
I would love to buy in order to get started paying off a mortgage, the longer I wait, the older I get before I pay that mortgage off.
Paying off a mortgage (or any other debt) is fundamentally the same as buying a GIC. You are improving your balance with the bank by the same amount, i.e. both are savings.
Having a bigger down payment is simply paying off the mortgage in advance.
But if you are renting, and saving the difference from what a mortgage would be on the same property for a future down payment, you are saving over 10 times as much money as the principal part of the mortgage payments. Not counting decline in the market price of the property which is many times greater.
It will get higher, but not as fast as you think. Renters, if smart, will try to keep their money coming from you for as long as possible, with the prices of housing going down and the whole buyers market shift. As was aid in the comments, be patient. And Anon.. No. 2 - that is some exhausting detailed research. Oh my I almost feel putting this on my realtor blog in a guide or something. But anyways. Nice task you gave us there. Ever tried a realtor? It helps. I should know. I´m one of them. But yes it can add a bit to your costs, but it will save you a lot of nerves. It´s still your choice though, so any it may be, I hope it is the best for you.
Jill
I think the UBC study is a more accurate way of measuring rent although the data set and population likely have a greater variability than what CMHC collects. Every year, the rental data from CMHC represents less and less of a percentage of the housing market due to their definition of a rental. Further, the rental product they evaluate is very old and does not command the level of rent that a newer place in a nicer area would provide. If one is going to assess affordability, it should be done with an ‘apples to apples’ comparison. For example, the 70’s style mega-rental buildings sell for less than replacement cost, which explains why nobody builds them anymore. It’s faulty to take the low rental rates in such a building and then assume a new unit in Yaletown is going to only get that amount of rent.
Just yesterday I spoke to an investor regarding his rental rates. He has a 1 BR unit in downtown Vancouver that gets $2,600 rent per month. He purchased it only a year ago and was cash flow positive with something like 25% down.
There is definitely room for somebody to develop a more accurate rental rate statistic that takes location and quality into better account.
Dave,
While I don't feel strongly that either way is better than the other, the CMHC data is the only one that isn't "new paradigm" and therefore you can use to track back beyond the last 3 years or so.
I don't think you can take anecdotal examples and make them market wide.
I agree, anecdotes in themselves do not define the market. I am just using an example that the ML report would not capture or even consider. I think the rents on Craigslist are closer to reality than the CMHC numbers, even though it is a smaller dataset.
That’s a problem with comparing US numbers to Canada numbers. Their methodology in collecting rent information is probably different than ours.
HHV's read by a realtor in Toronto?
Well somewhat off-topic, but I love this new price reduction on MLS# 251528 (2056 Hampshire, in Oak Bay).
Details: 4beds, 2baths, 1,915 finished sqft, built in 1937. Lot = 9,060. Hwd floors. Looks vacant.
Listed: Aug, 22 at $699,000
Price as of today: $575,000
Isn't that $125,000 off the original asking price?!
Sure, it was inflated to start with, but still...love it.
Craiglist certainly sets the high limit of the rental information.
Is it accurate or reliable to use information that is at the high end of the data range, considering that most rental properties may be achieving significantly lower rents. And that the ability to increase existing rents are somewhat limited by government.
I was looking at Reflections in Langford and the rents for a 2 bedroom 900 square feet condominium on Craiglist are at $1,800 and a 1 bedroom (720 sft.) at $1,500.
Now if you look at actual rents for 2 and 1 bedroom condo's in Langford they are approximately $1,100 and $900 respectively. Would you really pay a $600 to $700 premium to rent in Reflections?
If you were to do the UBC study which rents would you use?
Myself, I would use the most common realised rents and not asking rents at the margin. This would mean that the UBC study underestimates the level of the market correction. As you can see by the preceeding example, the error in the UBC study could be considerable and might be 40 percent off the mark. I think Tsur could have done better by contacting the property managers in order to get their opinion of current market rents than rely on Craiglist.
Craiglist's data are asking rents and may not be at market. Consequently, the study is not using market rents - which would be a serious error by a Sauder Institute student as it shows the student's lack of understanding of market value.
just jack
From that Reflections add on Craigslist:
"Breathtaking views from all rooms."
LOL!
If you want to have some fun, here's an invitation passed my way:
- Dumb Canuck
Are Canadian Housing Markets Overpriced?
Dr. Tsur Somerville, PhD
Director, UBC Center of Urban Economics and Real Estate
Foundation Professorship in Real Estate Finance, UBC Sauder School of Business, Vancouver, BC
The severe downturn in US housing markets is triggering concerns that markets in Canada will also contract dramatically. Despite more conservative lending practices in Canada that prevented the speculative excess seen in some US markets, we find that the housing stock in many major Canadian cities is substantially overpriced.
There are parallels between the path of house prices in Canadian and US markets. The US housing boom began in 1997 and peaked in mid 2006 with house prices rising 132 percent. Canadian prices began their run up in 2001 and have only in 2008 begun to slow. Housing affordability is a severe problem in some Canadian cities, limiting the ability of markets to continue to rise. Finally, declining sales and weakening prices are signs that the decade long boom in Canadian markets is over.
Are Canadian housing markets likely to follow those in the US down? Based on a recently published working paper (attached) that garnered front page interest in the national media, Dr. Somerville’s presentation helps to answer this question by analyzing whether Canadian house prices are overvalued. We ask: how do current house prices in nine major Canadian cities compare to their equilibrium or balanced market levels?
11:45am to 1:30pm, Thursday October 2nd, 2008
* * * * The Delta Ocean Pointe Resort * * * * Songhees Room 250-360-2999
Members & Students $25
Non-Members $30
Capacity for this event is limited to 60 attendees
PLEASE RSVP TO CFAVICTORIA@SHAW.CA BY 4:00PM on Monday, September 29
Anon, I think a thorough study would look at all price ranges. One could probably develop a low, medium and high end rental unit scenario for both rental rates and market price.
Craigslist is obviously biased towards one off investors and towards newer condos. The CMHC metric is biased to old rental buildings.
I think a lot of bears cherry pick their information by selecting prices for new condos and comparing them to rental rates for old decrepit buildings.
I think the UBC study is closer to the truth than the ML study. Who is ML by the way? ;)
Whether we think the rents advertised on CL or Used vic etc are way over or not they are getting those rates - and there is still almost as many "suites wanted" adds as there are advertised for rent. There's not really a lot of room for lowballing a suite.
Maybe $1,800 for a two bedroom is the new benchmark.
how many people do you know that can afford to sign a one year leae at 1800 per month that can't buy a crappy two bed condo for the same?
I still believe that $500-600/bed is most likely the median rent in Victoria.
ML is Meryl Lynch.
I think a lot of bears cherry pick their information by selecting prices for new condos and comparing them to rental rates for old decrepit buildings.
No we don't. Rental rates for purpose built multi unit rentals are irrelevant for valuation of individually titled properties.
What we do is compare rental rates for condos and houses to prices for similar properties. Sometimes you even have the same property for sale and for rent at the same time, as others on this board have pointed out.
Look at this townhouse:
BEAR MTN Quiet 2BR, full bath, 5appls, ns/np. Oct 1st. $1100 includes ht, hw, electricity.
Comparable units have been selling for well over 300K. That's a price/rent of over 300.
Back in 2004 I was looking for a bachelor/1BR. The going rate then was $500-600 for the bachelor and $600-700 for the 1BR.
I had to look for a place in June 2008 and prices had rose quite a bit. Bachelors were $600-700 and 1BR were $750+.
I eventually settled on a nice apartment in an awesome location (near Cook St. Village) for $875 inclusive (parking+heat+hw)
I searched on craiglist and I hardly got any replies to my inquiries. At the place I finally got I was first told that 5-8 people looked at it and 3 had handed in their applications. :( However the next day I got a call saying come on over because the 3 applications fell through on the cross-check.
I went over and the landlord seemed to like me and gave me an offer without a background check. I looked presentable and I had my references.
As an above poster said if you can present yourself and are able to pay the rent you'll still be in high demand in Victoria.
I'm going to stay put until the fundamentals are back in equilibrium i.e. it becomes cheaper to buy than to rent.
HHV,
I did a very quick search on Matrix and I found 133 condos that would meet your requirements.
Specifically, Cost $300K or less, 2 or more beds, condos only. I also only searched in the Core.
If I bump the price up to $325K, I get about 160 listing. If I have an unlimited price I get about 600 listings. So that means, about 1 in 4 condos can be purchases by someone who can sign an $1800/mo lease.
Well that's nice. But the real points are:
1) what would those condos rent for compared to cost to buy? See my post above.
2) what can you actually rent for $1800/month? In fact the majority of 3 bedroom rentals go for less than this. Here's an example of what you can rent for $1800:
Historic Home * $1800, lrg 3bdr, 3bth, nr Royal Roads, all appls, fp, hw flrs, util extra, lease, NS,
msr,
the question was not if you can buy a place for $1800 per month, it was more along the lines of how many people who can afford 1800 per month for rent can't actually buy?
more bad news from Merrill Lynch
Well, I used to read the bear blogs more obsessively when I thought there was chance I'd ever buy. Especially earlier this year when the large, central house I rent for cheap was sold to a developer. But, hmmm, he warned us he might not be ready for this project for a while, and said he was happy to have us stay. I didn't believe him frankly, and in my mind was getting ready to move, either to a new rental, or to a house we bought if prices became realistic.
Last weekend, realized that we may be here awhile. Builder is definitely in no hurry to start this development, as he has so many others on the go. So we cleaned out and fixed up the toy/junk room, moved youngest child into his own space, brother with whom he was sharing is happy again, and we are settling in for the long haul. We have owned three houses over 20 years, but as of next year, we will have lived in this house longer than any we owned. Waiting out the Victoria market may turn out to be something we do till we leave Victoria. Because when our kids leave, so do we. We don't intend to retire thousands of miles from where our kids are working and living, which won't be here, in all likelihood. Meanwhile, the bank balances grow, and we pay no property taxes, spend nothing on maintenance, etc. etc. Did I mention the rent was cheap? Oh yes, I think I did.
So, I've kind of turned a corner psychologically. When I said to my best friend, a real estate agent, that I had sort of taken back my house, in my mind, and made it mine again because I could be here another year or two, she responded, "Or five." So, sorry, HHV, if I don't care enough to look for myself, and am still convinced that renting is the most sensible course in this crazy little town, then I can't look for you. I just don't see value for money in the Victoria real estate market, and it still feels a long way off. Especially when you look at the dreadful, dilapidated state of the housing stock in this town. People haven't been able to afford their houses for so long here that they are mostly money pits.
Maybe $1,800 for a two bedroom is the new benchmark.
$1800 is most emphatically not the new benchmark for 2-bed flats. For $1800 today you can get a very nice detached house in a nice location. Craigslist is not worth a moment's glance for rentals in Victoria in my opinion - it's overwhelmingly non-professional landlords overreaching wildly in asking rent.
As someone stated above, the only sensible benchmark you could get for rents would be from property management companies. They have a sober and wide view of hundreds of rental properties' prices. They're also the only people I'm willing to rent from at this point - with the cultural obsession with property, and being a landlord still being equated (in Canada) with being Donald Trump, private landlords are just too insufferable.
So, sorry, HHV, if I don't care enough to look for myself, and am still convinced that renting is the most sensible course in this crazy little town, then I can't look for you. I just don't see value for money in the Victoria real estate market, and it still feels a long way off.
Amen. IMHO it's absurd at this point to even look at the prices for buying, unless you're just tracking the market down for laughs as many of us are. Renting will remain by far the most intelligent option for the foreseeable future, until an historic meltdown has occurred in this market.
If you watch CL and usedvic you'll note that overpriced sky high places sit for a long time and realistic asking rents move quickly. I'm a landlord and I've been through the tenant search a few times now. I price my place at market prices so that I get lots of potential tenants applying. Everytime I've gone through this there have been tons of losers. I'm talking about people who I felt uncomfortable talking to never mind renting to. I usually would only get 3 or 4 applications in a weekend that I would actually consider. Then it just came down to credit checks, references and how well we'd fit in together since it's a basement suite. Bottom line is yes there's lots of tenants out there but there's not many quality ones and for landlords like me who care, quality tenants are highly coveted. So don't despare when you show up and there's lots of other people looking.
I drive past Reflections every day to and from the four-bedroom house I rent for $1650. $1800 is not the new benchmark for what a condo will rent for, it's what some idiot flipper needs it to rent for to cover his mortgage.
I have a 4 bedroom rented for $2,300 plus all utilities, so I guess the anecdotal is weak.
$1,800 for a 2 bedroom? I guess it depends on the property and location.
For an $1800 detached home, I don't know what is considered a "nice location". If it means driving to work in the city or taking a 1-hour bus ride, you can have it.
For a typcial 2-bed apartment without in-suite laundry, I'd say $900 to $1100. If you want a condo with laundry, then $1100 to $1300. This is WITHIN walking distance or a short bus ride into downtown.
From today's Times Colonist
Canadians 'getting near' U.S. housing tipping point
I love this:
"Jennifer Podmore-Russell, managing partner of MPC Intelligence, a Vancouver-based development research firm, said "analysis paralysis" can affect homeowners as conflicting economic reports are churned out.
Although some industry analysts predict housing prices here will drop by 10 to 15 per cent from a high earlier this year, she doesn't agree. "There's nothing to indicate that right now," she said.
Although portions of the market may decline, Podmore-Russell, who analyses the new condominium market, said OVERBUILDING IS NOT HAPPENING IN GREATER VICTORIA. "We are not seeing a huge amount of oversupply coming to the market."
Um, look out your window?
http://www.canada.com/victoriatimescolonist/news/business/story.html?id=94becfde-1bcb-4a89-acdf-26661acd197e&p=1
For an $1800 detached home, I don't know what is considered a "nice location". If it means driving to work in the city or taking a 1-hour bus ride, you can have it.
For a typcial 2-bed apartment without in-suite laundry, I'd say $900 to $1100. If you want a condo with laundry, then $1100 to $1300. This is WITHIN walking distance or a short bus ride into downtown.
Then we agree, anonymous (BTW just pick the name/URL option to enter a quick name so that your posts don't fade into obscurity). $1800 is way too much for a 2-bed flat.
Not everyone works downtown. A "nice location" is waterfront on the Saanich peninsula, which is what I rent. But I work from home so this is my perogative.
I pay far less than $1800 for a three bedroom townhouse in James Bay, so the idea that expensive rentals will support an inflated housing market seems dubious to me.
Have a look at the amount of housing available from the capital regional district for market rent and you'll see what I mean.
The only housing that requires expensive rents to meets payments of landlords/specuvestors is new construction.
Last time I checked, most of the housing stock in Victoria was built/purchased more than 5 years ago.
I pay $925 for a two bed/two bath condo that is right on the bus route. It is actually a pretty nice place and has lots of amenities. It is about 10 minutes drive to downtown. I sure as hell wouldn't want to buy a condo (not into being told what I can or can't do with my own place, etc), but it is okay to rent one while waiting for this insanity to end.
Chickinvic
Oh, I forgot to add in my post above that this condo has washer/dryer hookups in the 2nd bathroom, so I do have insuite laundry. That is awesome!
Chickinvic
b2b,
Yes, but a large majority of people work downtown. This is where the rents are more expensive. Most people want to live near their work.
So this is why you have found a cheap rental ($1800) for a detached home: i.e., less people are interested in living away from work in the downtown area. You do not live where the average person wants to live.
anonymous, stop pushing the expensive rent downtown schtick, there are tons of rentals downtown $500 dollars/month cheaper than the benchmark you are quoting.
Greg,
I think you are out to lunch.
Please explain where one can rent an $800 2-bed apartment near downtown with washer/dryer.
I tend to agree with Jennifer. The inventory in Victoria has not grown as extensively as it has in Vancouver. The supply level is also dropping off if you compare September numbers to August. The MOI for SFH is still in ‘balanced’ territory with a level below 6. High end stuff is definitely not moving quickly but low end stuff is.
Prices have dropped for a few months straight, but they still haven’t significantly dropped below the long term trend, if at all.
I think there is less downside in Victoria considering that median prices are more affordable than in higher priced markets like Vancouver.
I still think there is some downside to go, but I believe it to be shallow.
5125 listings doesn't look like a "dropping off" supply to me...
Anon 1:53, Greg said $500 cheaper.
$1800 - $500 = $1300 for a 2 bedroom, not $800 for a 2 bedroom in Victoria relatively close to downtown.
A quick search reveals139 rental listings, mind you many are not just in Victoria, as the default search isn't specific enough. So using some of the below keywords, we get:
2 in Fairfield ($900, $1200)
3 in JamesBay (each $1250)
3 in Esquimalt ($1100 & 2x$1200)
57 in "Victoria"
etc.. just search, it takes minutes, and new listings pop up every day. Today alone there's 34 rental listings so far - that's a lot of choice if you can prove yourself to be a "good" tenant.
I'm the same anon as the post above... just wanted to add that I got a 1 bedroom waterfront rental, 7 minute drive to downtown with washer dryer, fully furnished, includes all utilities, internet, cable, etc for less than $1000.
Seek and you shall find.
I am in total agreement with Victorriana's earlier summary of the housing market in Victoria. Our family is comfortably renting a large, conveniently located house at a very reasonable price. I no longer am bothered by relative's and other's remarks about 'poor' us for not 'owning' our own home, as I feel comfortable waiting for the 50% off sale. It seems to be coming alot sooner than I anticipated.
So this is why you have found a cheap rental ($1800) for a detached home: i.e., less people are interested in living away from work in the downtown area.
Are you claiming that most people in the market for detached houses - i.e. families with children - want to live downtown?
What planet are you from?
The closer you get to downtown the higher you can get for rents as a landlord- as long as you don't pass the druggy threshold wherever that may be. Fernwood should be nice but is very infested until you get closer to Shelbourne.
Fairfield is a good place to live, good place to rent, but good luck finding a reasonable price there!
Patriotz,
The population density of Victoria centres around the downtown area.
Check out this link:
Victoria-Area Population Density
So, it seems MOST people want to live near downtown. I'm not saying people with families/children -- I'm saying MOST people. In fact, I surmise that most renters are people in their 20's WITHOUT families/children. THESE are the people looking to rent apartments and 2-bed homes. This is where the demand is. Sp this is where the rent prices will be highest.
And it appears that the majority of people want to live close to downtown. (if you're confused, take another look at the map in the link above.)
Anon 3:50pm,
Yes, this is exactly what I have said. $1100-$1300 for a 2-bed with in-suite washer/dryer, close to downtown. You might be lucky and find a 2-bed for $1000. But the majority of places go for 1100-1300.
If you don't need your own washer/dryer, then there are 2-bed apartments for rent (with shared laundry) in the $900 to $1100 range, close to downtown. You might be lucky and find a 2-bed for $800.
Like any big city, the closer you are to downtown the higher the rents, and the higher the home prices are. Of course, there are always undesirable areas of a downtown core. But in general, the closer to downtown, the higher the rent. It's not rocket science.
Captain has more goodies for us today: time to start cheering for the good guys
i think I may buy his book, really like his writing.
I ended up renting the very first place I looked at. I found it on Craig's List. It's in Gonzales area just a block from the ocean and it's a bright upper bachelor suite for just $550 per month. It's absolutely perfect for one person and I'm saving so much money for when the time comes to buy. I also ride my bike to work so I barely use my car anymore.
There are definitely deals out there you just have to be very patient and look everyday to weed through all the ripoffs.
By the way, it was in the last few months that I found it.
It may not be rocket science, but its damn difficult trying to estimate rents.
A myth in real estate is that the closer you are to downtown the higher the home prices and the rents.
Not so, homes in Gordon Head are more expensive than Fernwood and homes in Bear Mountain are more expensive than Gordon Head.
How about rents? Rents cheaper in Esquimalt than Langford.
And why are homes in Deep Cove and Lands End so damn expensive!
A lot of it has to do with exclusivity. In otherwords, I don't want your kind around me or my children. Of course you don't know who I am and I don't know who you are.
But to paraphrase Ross Perot when speaking to a group of black americans.
"I know how YOU people think"
or
Mcain describing Obama as "upity"
or Groucho Marx
"Any club that would have me as a member isn't worth joining"
Oh by the way. Now that the USSA is blaming the Royal Bank for their financial woes do you think they might have to democratise Canada next. Oh were is Leonard Cohen when you need him. "Bringing democracy to the USA".
Thanks for letting me have a Friday Rant.
How about that t-shirt: "DEMOCRACY - WE DELIVER" with a piccy of a US bomber delivering its payload.
Perhaps Bush could dust off his flight suit to pose in front of a WaMu branch with a banner behind saying "MISSION ACCOMPLISHED".
Credit crisis to increase delays and paperwork - Vancouver Sun, Sept 18th, 2008
"Look for Canadian banks and financial institutions to be even stricter now when it comes to mortgages"
"The turmoil and uncertainty out there may have made Canadian lenders more cautious but the actual balance-sheet impact has not been that severe yet"
Wait a second... I thought were "insulated" here in BC?!?
Talk to any Merican, it's Isolated not insulated.
"insulation" was a reference to Tony Joe's recent remarks... that Vancouver Island is "insulated"... but he might as well say "isolated" because that's pretty much what he means in the end.
Tony Joe isn't lying about Victoria being insular. He's discovered the secret that every geologist knows.
http://www.emporia.edu/earthsci/student/seigel1/Tectonic_Evolution.htm
Geologists know to invest in Victoria.
So, it seems MOST people want to live near downtown.
Do they now? What do you mean by "near downtown" anyway? City of Victoria proper?
Ok, why don't you head out to Oak Bay and ask them if they'd rather live in City of Vic? Or Ten Mile Point, Gordon Head, Broadmead, etc. There are cheaper neighbourhoods in City of Vic than all these places, so why are they living farther out?
Do you think that someone who works at, say, the naval base or the airport wants to live near downtown?
I would say that most people without kids who work downtown would like to live near downtown, but that's about as far as it goes. This is the reason why rents are higher near downtown - these people have more disposable income.
Patriotz,
I would say that "close to downtown" means Oak Bay, Esquimalt, Broadmead, etc. Up the peninsula, near the airport, Colwood, Langford, and Metchosin are not.
Did you even look at the map I linked to? The majority of the population is currently living "close to downtown". Again, this is where people want to live, and this is where the rents and home prices will be highest. Victoria is no different from any other big city.
If you won't or can't pay the rent "close to downtown" you will have to move farther away from the city centre.
So talking about renting a house for $1800 on the Saanich peninsula is fine. But the majority of people do not want to live that far away from work. This is exactly WHY the rent is cheap. Gas is expensive. Time is expensive. Commuting a long distance to work is not what most people choose, unless they are forced to for various reasons.
Did you even look at the map I linked to? The majority of the population is currently living "close to downtown".
You have defined "close to downtown" so that your claim that "the majority of the population lives close to downtown" is tautological.
In other words, for you "close to downtown" means within such a distance that the majority of the population lives inside it. Most people would call that the "inner suburbs".
And yes the inner suburbs are more expensive than the outer suburbs in Victoria, and pretty much everywhere else.
"Close to downtown" for a city the size of Victoria means walking distance to most people, or at least to me.
But each to his own definition.
Yup. This is my point. I was simply explaining why b2b has found a relatively cheap rental. He is living away from the city-center, which means he likely did not find the same demand/competition for rentals, and, therefore, was more likely to find a cheaper rental. Without this differentiation we do not get a feeling for why the $1800 rent he quoted was below the current (inflated) norm in the areas "close to downtown", where the majority of people live.
will anybody, government save the RE market if it falls like the stock market?
Too many surprise in the past few days on the stock market. i think more surprise is coming from the RE.
I'd rather have a piece of the rock at the moment. I was in two major banks today with cash problems. The first I could hear one of the managers giving another branch hell for sending a customer their way for cash, "you knew our vault is closed, and we have no more cash than you, why did you send them to us?"
The other was clear about the fact that they have been very busy today with customers shifting to insured products - we're talkin' CIDC insured here.
Would I rather owe money or be owed?
Bank vaults no longer cary huge sums of cash. Everything is electronic and there is no need for large bags of cash. So you can't get cash take a cashiers cheque. If you still want four or six bags of dough, then you will have to wait a few days until it arrives.
Are we really going to go down to the understanding of the lowest common denominator.
This "crisis" will only have an affect on the friends of George Bush. They were waiting for the big payoff for getting him elected twice.
HHV,
Looks like you better jump into the RE market right now. I wanted to let you know that real estate sales on Vancouver Island will be increasing very soon!! Seems like there will be a large injection of cash into the BC economy over the next few months.
Realistically house prices should not be more that 3X your annual salary …if I earn 80,000 a year I shouldn’t have to pay more than 240,000 for a home…
End of story – try finding a home in the Victoria Area for 240,000 …although house prices should be even lower than that …average family home should be around 160,000 -> 175,000 …we’ll see the decline over the next 5 years. I for one will be very happy watching people who bought in the upturn loose their shirts. Because I told you so wouldn’t just cut it. I have NO Sympathy …people knew what they were doing… and idiots who borrowed on the equity in their property to buy more property are even dumber
What most people are not realizing is that falling prices are GOOD for people…NOT bad… falling house prices is what should happen – because they are overpriced right now by about 85%...YES 85%... they need to come down a lot for prices to be affordable to the average family. People should not live mortgage poor just because they think they have to. Canadian middle class should be able to afford a home and vehicle and entertainment for a family of 5… without using credit cards and borrowing on the equity in your home
What most people are not realizing is that falling prices are GOOD for people…NOT bad… falling house prices is what should happen – because they are overpriced right now by about 85%...YES 85%... they need to come down a lot for prices to be affordable to the average family. People should not live mortgage poor just because they think they have to. Canadian middle class should be able to afford a home and vehicle and entertainment for a family of 5… without using credit cards and borrowing on the equity in your home
VREB releases September Stats
September 2008 Statistics - Monthly Analysis
August 2008 shown in ()
MLS Sales - 512 (517)
MLS listings - 4,754 (4,657)
SFH Average - 549.3K (549.9K)
SFH 6 mo. Avg. - 585.6K (592.6K)
SFH Median - 500K (512K)
All SFH Sales - 309 (269)
Condo Average - 319.6K (302.2K)
Condo Median - 276K (280K)
All Condo Sales - 111 (160)
Town Average - 405.3K (414K)
Town Median - 370K (382K)
All Town Sales - 53 (53)
Year-over-Year Analysis
GV - Greater Victoria
September 2007 shown in ()
MLS Sales - 512 (632) - Down 19%
MLS listings - 4,754 (3,352) - Up 41%
GV SFH Average - 549,284 (584,193) - Down 6%
GV SFH Median - 500,000 (520,000) - Down 3.8%
GV SFH Sales - 286 (306) - Down 6.5%
GV Condo Average - 319,562 (343,462) - Down 7%
GV Condo Median - 276,000 (289,450) - Down 4.6%
GV Condo Sales - 111 (148) - Down 25%
GV Townhouse Average - 411,075 (406,608) - Up 1.1%
GV Townhouse Median - 372,500 (375,000) - Down 0.7%
Townhouse Sales - 50 (73) Down 32%
I can see the TC headline now. "Condos up an incredible 18% from last year!"
The September VREB Stats Analysis slideshow is now available.
Comments and feedback are appreciated.
Median down 10.4% to 500K from April peak of 558K. For five months that makes 2.1% per month, continuing the previous downward trend of 2% (or $10K) per month.
For every month that I pay $1100 a month in rent for a good 2 br, I save $8900. At this rate, by next April, I'll have saved around $105K by not buying. Of course this doesn't count property taxes, mortgage interest, etc.
One hell of an investment...
Dumb Canuck
The trend is clear, the economist who was “naked” now is trying to put their cloth on. In the garbage can are” we are different, good time to buy, good investment, best place to live…” Now the reality is the rule for everything “cycle”. We are entering the down side of the RE cycle.
Since we're not seeing angry denials from bulls on here (not that I miss them!!) can we assume that we have passed Denial and are entering the Fear stage?
Euphoria [TOP], Anxiety, Denial, Fear, Desperation, Panic, Capitulation, Despondency [BOTTOM], Depression, Hope, Relief, Optimism
The thing is, this time round, as we can see from the US will have a long Despondency period. No V-shaped recession, this.
Panic will set in in the Victoria housing market once listings stay up solidly and prices only gather speed downward at a breathtaking pace.
Hi there, a bull here...
Quite frankly prices are not dropping fast enough for me. In fact, they really haven't dropped at all - take out million dollar + places and there's not exactly much of a major reduction going on here.
Sure there have been some 'good deals' here and there and lots to choose from but we're not exactly seeing $3 and $400,000.00 dollar bungalows with basements in ffld.
I listened to Tony Joe speak the other night - do I believe (or does he believe for that matter) Victoria is 'insulated' - who cares? He also had a bunch to say about why people move here and there were some great stats on who is buying here.
On the same token, it doesn't really matter what anyone says (yes including me) and if the media is sensationalized or spinning the numbers or or or...
Show me the $$....
and as an RE investor - I'm in with 2 feet.
"Euphoria [TOP], Anxiety, Denial, Fear, Desperation, Panic, Capitulation, Despondency [BOTTOM], Depression, Hope, Relief, Optimism
The thing is, this time round, as we can see from the US will have a long Despondency period. No V-shaped recession, this.
Panic will set in in the Victoria housing market once listings stay up solidly and prices only gather speed downward at a breathtaking pace."
The BS here (that's bear sh!t) it's laughable. I do not see any fear or pandomonium in the streets, only fear mongering as on here.
If you can't afford or choose not to afford a Victoria home at today's prices, you will forever rent. And maybe that's OK with you. Personally I hope prices come down another 20-30% as I intend to buy another property or two. Victoria is great.
"The BS here (that's bear sh!t) it's laughable. I do not see any fear or pandomonium in the streets, only fear mongering as on here."
Of course you don't, because it's not here yet. Big emphasis on YET. Some people are starting to get nervous though, checking their portfolios several times a day.
When (not if) the stock markets walk off a cliff - whether as the sum of many consequitive significant drops (4-5%), or one or two massive drops - within a couple of months, the "BS" will be redefined as the voice of reason during a time of irrational exhuberance, but by the time people realize this, it will be too late.
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