The best I can come up with is a price per square foot comparison based on the Fernwood neighbourhood. I chose Fernwood because it is the most affordable Victoria-proper neighbourhood for both rent and own scenarios.
I used a ten-unit rental average to produce an approximate price per square foot rental metric of $1. I stress that this is an approximate number. Some places had asking prices closer to $1.40/SF while the larger home/suite rentals were in some cases as low as $0.80/SF.
To calculate the ownership metric I've used:
- a 5 percent down, 35 year amortization and 4 percent interest rates to calculate the SFH price per square foot metric. I'm in no way advocating the use of these toxic products, I believe I am simply recognizing that this is the default mortgage right now being used by first-time buyers making the switch from rent to own.
- a median Fernwood home price of $475K
- an annual tax bill of $2200
- an 1 percent per year ($4400) maintenance calculation
- Mortgage = $1940 per month
- Taxes = $125/month after FTB tax grants
- Maintenance = $350 per month
The average square footage of the properties in this neighbourhood is close to 1800SF, so that is the number I've used to calculate the price per square foot ownership cost of $1.34.
Keep in mind these are per month numbers. After having done this calculation, crudely at best by my own admission, I can understand why FTBers with the ability to qualify for mortgages high enough to get them into these properties think they aren't overpaying or think that owning makes sense over renting at these prices. Especially if they can find some suite rental income in the property they buy. It's for this reason that I see strong sales to listings ratios in this market segment.
The only thing that hasn't happened to these types of properties is a listings spike. I don't think we're going to see it either. The only way that the median priced listings will rise in Victoria proper, IMHO, is higher priced homes will have to drop their prices far enough to compete with these types of homes. The ownership vs rent costs in Victoria SFH is just too close to encourage current owners to sell and then rent.
Perhaps it is impatience, but I am beginning to think that entry-level SFH prices will not drop to the significant extent required to drive median prices below the $400K mark, at least not this year. Perhaps it will require several years, maybe even longer, before this occurs and will happen slowly enough, and be neutralized by inflation, that the entry-level price doesn't seem to drop at all. I still think we're in for a 35% total price correction market-wide, but I'm beginning to think that this will really be driven by the high end, and that the low end will fair better in price drops because of the high rents Victoria commands.
We're really starting to seriously consider looking elsewhere for a better quality of life. I love this city, but if we want to live the way we want to live, have the careers we want to have, save for retirement and rainy days like we think we must, and have a small family, up-island and the major prairie cities are looking more and more attractive everyday.