Saturday, September 24, 2011

Victoria, not as beautiful as Saskatoon

Call it craziness, but those funny folks over at Microsoft's MSN.ca think there are six cities in Canada with more attractive people, places and things than Best Place in Canada Victoria. And I thought blue-hair was the new black?

A favourite argument of the ever-increasing-Victoria-home-price crowd is the desirability of Victoria in the minds of too-many-to-count, from-away Canadians. "Everyone wants to live here." "We have the mildest climate in Canada." "We're in a rain shadow!" All of which are subjective statements only partially grounded in comparable truth. Victoria might be in a rain shadow, but it still has miserable months of endless grey in the winter time, four of them, from November to February, that chase many a snowbird to sunnier climes for a desperate dose of natural Vitamin D.

It's funny, when we compare the most beautiful cities as ranked by MSN to the most expensive cities as ranked by MSN, you'd expect, if the argument that beautiful equates to people willing to pay more to live there, that places more beautiful than Victoria would also cost more. It ain't so though.

Victoria is the seventh most beautiful city, yet the second most expensive. There must be something missing in that argument to justify high home prices then outside the beauty. It must be livability; or maybe not, as MoneySense, a magazine that factors in costs relative to incomes/opportunities etc, ranks Victoria 8th on their list, behind places like Brandon, Manitoba and Fredericton, New Brunswick, yes, New Brunswick.

Now I know, I know, using MoneySense to fight an argument originally supported by MSN is like saying these apples aren't as nice as these oranges. I tried to find an MSN article, but the one I found didn't have Victoria on it. But of course, it also contained the qualifying word "Next" so I'm sure Victoria was omitted primarily because it must be included on the original list. Funny though, CBC has an article and poll up about Canada's most livable cities, including such desirable locales as Yellowknife and Winnipeg, but it leaves Victoria off it's list entirely.

Now I know, some of you who think the sun shines out from underneath the soon to be rebuilt Johnson Street Bridge will lambaste my "arguments" in the comments as pure hogwash. Which is perfectly fine. I chose to fight fire with fire on this little topic.

When you want to dig up some population growth, household formation, housing start and demographic data to support the claim that "desirability" is higher in Victoria than elsewhere, that land constraints are actually leading to a reduction in available supply creating a supply/demand imbalance supporting escalating prices (isolated from other factors like interest rates, incomes and the looming demographic purge of real estate), we can move on from tripe-filled, spurious arguments about local real estate valuations.  

18 comments:

Paula said...

Yes Victoria is desirable because of the weather, small town feel, sailing and other outdoor activities. Everyone that lives in Victoria thinks it's the best because those are our priorities.

But it all depends on what you're looking for. I've lived in both Victoria and Vancouver, and many many Vancouverites wouldn't trade that city for anything, because of the number of options they have ... high-moutain scenery and hiking and skiing that's literally 15-30 minutes away, quiet sunset walks on the seawall surrounded by forest and next to the water (Victoria comes close but doesn't match this because of noisy Dallas Rd and endless Songhees condos), easy proximity to US/Okanagan and other travel destinations, and entertainment at all the great music and theatre venues. Rain isn't a big barrier, because you learn to be ready every day for sun or rain - if it's sunny, Vancouverites spend all day outside, because you don't know when the next rainy day will be - you end up spending as much time outside as in Victoria. Many Vancouverites view Victoria as "trapped on a rock", which I find fine, but some people just wouldn't want it. It comes down to priorities.

a simple man said...

Even if you get sun in Saskatoon all winter, you can create no natural vitamin D from October through April. So, even if it is sunny you are still deficient.

I lived the Saskatoon life - never again!

Phil said...

Several friends of mine left Victoria for Toronto years ago. Whenever they come back they complain about both the weather and lack of entertainment options here.

When we talk about the rise in real estate values in Toronto they claim "The GTA is out of land" and "Rich immigrants are driving up prices."

Sound familiar?

Introvert said...

HHV, in the previous topic's comments you wrote:

The argument that we're running out of land has been used for 30 years to justify sky-high prices.

First, Victoria hasn't had sky-high prices for 30 years. Maybe for 10 or 15, right?

Second, starting from the early 1990s and continuing until around now, our prices increased faster than almost all other Canadian cities. If everyone in Canada was able to borrow money cheaply during some or much of this period, why didn't places like Saskatoon and Kitchener end up having average-priced homes of $500,000 like we did/do?

And if it's not the out-of-towners who drove up prices, then what is it about we 330,000 Victorians that made us borrow, and spend, and drive up our own prices to today's heights, where the average house costs over $500,000? Why didn't Saskatoon or Kitchener or almost all the others do the same?

Any answers?

Paula said...

In Victoria, 2011 home prices are about twice as much as they were in 2003.

For the same period in Saskatoon, average home prices increase 3 times. See page 4 graph: http://publications.gc.ca/collections/collection_2011/schl-cmhc/nh12-232/NH12-232-2011-1-eng.pdf

So Saskatoon has had just as much (or more) of a boom than Victoria. House prices in coastal cities have always been at a premium due to nicer weather. But at some point your average family reaches a limit and doesn't think it's worth the premium anymore.
$300k vs $100k is do-able but $700k vs $350k isn't so much.

HouseHuntVictoria said...

"First, Victoria hasn't had sky-high prices for 30 years. Maybe for 10 or 15, right?"

When my family moved from AB to Victoria in the mid-1970s, a similar home to what they'd previously owned cost 25% more to buy in Victoria.

Toronto cost more than Victoria right up until about 15 years or so ago, but they were the exception, not the rule. Victoria has been more expensive than the Canadian average for a lot longer than 10-15 years.

"starting from the early 1990s and continuing until around now, our prices increased faster than almost all other Canadian cities"

Not really, no. Many other cities, most namely in the prairies, had shorter and steeper price inflation... in other words, faster.

"what is it about we 330,000 Victorians that made us borrow, and spend, and drive up our own prices to today's heights"

Off the top of my head, I'd say the majority share the belief that they should pay a premium to live in this city as opposed to elsewhere. They've bought into the industry marketing and the local meme.

I'd also say that Victoria's housing market suffers from a unique problem that is a huge part of why we are where we are: low sales volume relative to total housing stock. We turn over around 2-3% of housing stock each year. A lot of other cities turn over almost double that.

Further, Victoria is one of the few locales where luxury, waterfront and acreage properties are lumped in with family housing stock when average prices are reported.

Low sales volume, low housing stock turnover, inflated average property price reporting coupled with consistency over time, conditions locals to accept "the way it is" and pay what the banks will give them... and it's certainly truth that bank lending is location and property type based as much as it is applicant income and credit worthiness based; meaning a bank may give a borrower $500K in Victoria but only $350K for the same property in Saskatoon.

There is no disputing that the period 2002-2006 in Victoria can only be described as a price boom... several years of double digit (into the 20%+ range) average price growth is evidence of that. You could say this is the result of an improving provincial economy (rising incomes and consumer confidence), mortgage market liberalization (loosening credit standards, increase in mortgage money supply) and supply demand ratios that reflected these factors.

Saskatoon experienced the very same thing, only more isolated in time frame to 2006-2008, hence the higher rate of growth (I think it was 2007 when their prices jumped almost 50% in one year).

MC said...

Sometimes the mild weather feels like this "zzzzzzzzzzzzzzzzzzzzzzzzzz". A storm would be nice once in awhile to shake things up!

patriotz said...

It's a Canada wide bubble people. The timing of that bubble has varied across the country, but that was also true of the US. Now what does all of Canada have in common? That's the reason for the inflated prices.

It's correct that Victoria has always been relatively expensive compared to the rest of Canada. People have been willing to pay a higher % of their income for shelter.

It's not correct to assume that Victoria (or anywhere else) can sustain an excessive price/rent based on subjective factors. Investment returns don't vary based on temperature or hours of sunshine.

a simple man said...

Every time I read the heading of this blog I start shaking, remembering the -45C winters, the square tires as you drove down the ice-covered streets, the living inside for 4 months of the year. Then summer comes - up to plus 40C and the mosquitoes so bad you can't stand it outside - so you go inside.

But the river valley is ok, but not match for Dallas Rd or Willows Beach or a thousand other places in Victoria (I find new places all the time - like Arbutus Beach).

Introvert said...

A Simple Man, you're absolutely right. Here you can discover Arbutus Cove Beach; in Saskatoon you can discover another Kal Tire.

Just Jack said...

According to some of the long term residents in Victoria, the mid 1970's were an interesting time. That's when most of Gordon Head was built and the government was expanding with house prices in Victoria being higher than Vancouver.

Didn't last long though.

The late 1990's were tough years in Victoria as there were more people leaving the city than immigrating. House prices took a dip as young families struggled to make a living and left for jobs in Alberta.

The one thing that was constant through out all these good and bad times was the weather.

Alexandrahere said...

Victoria hasn't always had the highest prices. Back in the 60's and early 70's Ottawa had much higher prices than Victoria. Now there is no comparison.

Just Jack said...

Now come on.

When we had the snow last winter, we all went out and enjoyed it. Snowmen, toboggans, snow ball fights, hot chocolate, hot spiced wine, Eskimo kisses ...

How many of us got up this morning and said...

Look, look, its raining! Its raining!

a simple man said...

3 days of snow at -3C is far different than 5 months of snow at far colder.

And for the record, I was not happy to see it and rejoiced when it once again was nothing but a frozen memory.

HouseHuntVictoria said...

The question isn't a statement of "we have great weather" it's a question of what is a realistic price to pay for that weather.

History shows us an average of one household's average annual earnings... which of course has grown over time, but which could roughly be expressed as 20%-25% more than most cities across Canada.

What was claimed by some in the previous thread, was that people will/are willing to pay more, and more grows, over time. Which I call BS. I don't dispute that people are willing to pay more... history quickly shows me a moron if I did, but history doesn't show that more grows at a faster rate here than elsewhere unless you cherry-pick short timeline data sets.

a simple man said...

HHV - I agree - would pay maybe a 20% premium for living here, but that is a stable premium and will not increase over time.

Marko said...

Monday, September 26, 2011 8:00am:

MTD

September

2011

2010

Net Unconditional Sales:

352

395


New Listings:

1,065

1,211

Active Listings:

4,745

4,323


Please Note
•Left Column: stats so far this month
•Right Column: stats for the entire month from last year

Robert Stack said...

Victoria is a pleasant, ordinary mid-sized Canadian city with a striking view to the south. That view gets less striking the longer you live there, which is why the walk along Dallas Road is often devoid of walkers once the tourists leave. The climate is mild, but grey and dank in the winter and both too mild and too dry and in summer - it manages to be cool and brown at the same time in July and August. Canadians who dislike winter like Victoria; Canadians who like sun don't. No one from the US retires to the North West, so the climate is not so much great as un-Canadian.

Saskatoon is a pleasant mid-sized Canadian city. Cold Jan and Feb, but bright. Very green and hot in the summers. Has a nice river valley and is surrounded by lakes. Very cultural. Lovely campus.

It's about a tie. Except polls show people in Saskatoon are happier.