Tuesday, January 3, 2012

The truth

You can read the spin, or you can learn the truth. Year over year, single family home prices in the VREB reporting area fell by 8.4% between December 2010 ($647,063) and December 2011 ($595,582).

Marko Juras gives us the sales volume breakdown in unit sales and dollar amounts:

2007 = 8,931 unit sales: 12.23%
2008 = 6,519 unit sales: (27.01%)
2009 = 8,096 unit sales: 24.19%
2010 = 6,546 unit sales: (19.15%)
2011 = 6,040 unit sales: (7.73%)

2005 - $3,206,969,321
2006 - $3,373,171,099
2007 - $4,146,651,569
2008 - $3,111,882,746
2009 - $3,775,730,705
2010 - $3,239,493,835
2011 - $2,981,977,290

No matter how many times industry reps repeat the "balanced market" mantra, the numbers don't live up to the lie. It wasn't a balanced market. Not compared to 2010, nor 2009, nor even the height of the dismal 2008 market. 2011 was an absolute stinker compared to 2007. A flop when evaluated against 2006 and just "a wee bit off" when you go so far back as 2005. Truth be told, you have to go back a decade to find a market like this past year. Remember then? That was back when everyone was telling you that real estate was a horrible investment.

It's true though: when expressed as an annual average, the market only fell by just under 3%. Until you add in inflation to your loss, which effectively doubles it. Heck. A piddly little one year GIC paid better than Victoria single family home real estate last year.

But don't worry if you bought last spring, you're in it for the long haul right? Hopefully you bought in Fernwood.

218 comments:

1 – 200 of 218   Newer›   Newest»
Leo S said...

I reckon there might be a small bump in prices in the next couple months while inventory rises again. I'd be really surprised if we don't see at least equal or higher inventory this year as last.
Then continued price declines for the rest of the year.

a simple man said...

I am noticing a bit of a spike in listings already. Most likely relists.

Just Jack said...

What is it about Fernwood anyway?

I thought everyone wanted to live in the Westshore or Sooke or Saanich. Turns out it's Fernwood?

S2 (JJ's wife)

Just Jack said...

With the low, low volume of sales - will 2012 shape up to be the year of bizzaro sale prices.

Like a house on a lot in Victoria's Central Park selling for $250,000 or a freehold condominium in South Oak Bay selling for $150,000, or single wide manufactured homes selling for $25,000 in Langford?

My opinion, is that low sale volumes are here to stay. That leaves unsold inventory to steadily increase as speculators, investors and homeowners crowd around the exit doors of the Great Canadian Real Estate Casino.

If you've got CASH, there will be some good opportunities coming up this year.

And equity is not the same as cash. You'll find that the lenders will cut back on the loan to value ratio, if your trying to add another home to your Donald Trump empire. I can see lenders reducing the loan to value ratio to 65% or lower if your trying to re-finance to buy another home. This year, the banks are going to want to see some of your skin in the game. Unfortunately, for most people, all of their money is tied up in real estate.

reasonfirst said...

Anyone else lose access to FairRealty's PCS? I get "Page not Found" from my link.

DavidL said...

TD predicts trouble for B.C. real estate, Toronto condos

British Columbia is forecast to have it worse, said senior [TD] economist Jacques Marcil, and will likely see "a signifcant correction" this year. Indeed, he said in a report today, the Vancouver market likely peaked last year.

The report, which examined the country's provincial economies, projects home resales in British Columbia will sink 3.7 per cent this year, while prices decline 3.5 per cent.

"The correction will extend into 2013, as unit resales fall a further 5 per cent while prices slip 4.4 per cent," he said.

Leo S said...

@reasonfirst. Works for me. Through Jinwoo Jeong @ Fair Realty

Sweetrealtor said...

Fair Realty's website was down over the holidays for a revamp. If you are still having issues, email admin@fairrealty.com. Happy New Year.

Sweetrealtor said...

I've got them looking into it now.

Just Jack said...

So how bad can a real estate market really get?

You would have to look to the Gulf Islands to see the future.

Today there are some 251 homes for sale with 5 homes selling in December. That's 50 months of inventory. That's a bit silly, so looking at the average number of sales over the last three months gives us 15 months of inventory. And that 15 months of inventory has been around for at least a year now in the Gulf Islands.

So, how about prices in the Gulf Islands. In December, one of the only five sales is of a shack on 5 acres having a water view for $265,000. The previous owner bought the property for $275,000 in November 2003. Which is close to wiping out the entire rise in prices over the last decade. OUCH!

What would that mean for the core municipalities of Victoria? That would be a roll back from our current home median of $577,000 to $325,000.

A drop of some 44% in prices, even with the interest rates of today. All that is needed is to have the months of inventory to be 15 months over the course of a year.

Is that likely? Sure, right now the core is experiencing close to 5 months of inventory which is more than triple what the core districts experienced in 2007. The Western Communities is experiencing close to 10 months of inventory.

And no one has said that the Gulf Island market has collapsed - it's just corrected. What would be happening is that our market would revert back to when a single person working in a slightly above average government vocation could buy a starter home within 10 miles of the downtown core. Say a 1000 square foot rancher on a standard lot in the Gorge for around $225,000 at today's interest rates. Using no more than 25% of their gross income on home payments and property taxes. That leaves cash for holidays, utilities and the kids university education.

Most people looking to buy their first home are going to need that low debt ratio of 25% or less of their gross income for housing because of the uncertainty in the economy.

And if you're not in the government and work in construction. Pack up your bags and move to where you can find work - because it ain't gonna be in Victoria.

That's not a market collapse - that's just a correction.

reasonfirst said...

Sweetrealtor - thanks

Introvert said...

Just Jack, I really wish you'd stop using the Gulf Islands as a portent for Victoria. It's comparing apples to oranges.

Victoria is medium-size city; 99.9% of Victorians (and non-Victorians, for that matter) would not or could not live on any one of the Gulf Islands, for reasons such as work, proximity to a hospital, proximity to amenities, etc.

So for you to apply a Gulf-Islands logic to the core of Victoria and muse about "a roll back from our current home median of $577,000 to $325,000" is absolutely absurd.

Anton said...

@ Introvert.
Nervous? They used to say who would want to live on Vancouver Island with the isolation, lack of services, poor shopping options etc. Salt Spring has a decent hospital with a helipad and lots of amenities like schools, an indoor pool an arts centre, restaurants shopping etc. Sounds perfect. Oh I forgot, it's not Oak Bay.

Paula said...

Today's Times Colonist is reporting on some stats:

Home sales tumble to 11-year low

Leo S said...

So for you to apply a Gulf-Islands logic to the core of Victoria and muse about "a roll back from our current home median of $577,000 to $325,000" is absolutely absurd.

Why exactly is that absurd? You realize that it's relative, right? Just Jack isn't saying our prices are going down to those of Salt Spring. He's saying they're rolling back to prices we had many years ago. Obviously prices in Victoria will always be higher than the gulf islands, but that doesn't mean we can't go back to 200X just like they are.

Also, while I agree that places like salt spring would be hit worse than Victoria in any real estate correction, they're also just getting started. If they're already at 2003-2005 prices and still have 15 months inventory, do you think they'll stop there?

Also,

Leo S said...

People are taking longer to make decisions, though I'm not sure why when interest rates are so good.

Damnit people, get back to the lemming mentality already! Forget all this stopping to think about the biggest purchase of your lives. It's always a good time to buy real estate!

Marko said...

As bad as the sales numbers look I am not seeing any deals out there. Showed 6 places today...

a simple man said...

Marko - the market is sticky on the was down - but a few people will blink soon and then it is all going to start really going down.

Introvert said...

Nervous?

Not nervous at all; my bet on real estate is in the long-term. I pay attention to the short-term purely for sh!ts and giggles.

They used to say who would want to live on Vancouver Island with the isolation, lack of services, poor shopping options etc.

Not many in my circle (family and friends from Calgary) are saying, "who wants to live on Vancouver Island?" They're saying quite the opposite: "The plan is to eventually move to Vancouver Island."

Isolation? The obscene cost of the ferry to leave this island certainly has an isolating effect. Lack of services? I don't see any. Poor shopping options? If you're really picky, then yes.

Salt Spring has a decent hospital with a helipad and lots of amenities like schools, an indoor pool an arts centre, restaurants shopping etc.

Nice try. Greater Victoria is the 15th most populous metropolitan area in Canada, even if it is on an island. Salt Spring—Ganges, to be more specific—is a tiny village.

Leo S said...

Marko - the market is sticky on the was down - but a few people will blink soon and then it is all going to start really going down.

I think it will continue to be sticky all the way down. That's ok though.. The current rate of decline is fine with me.

We still have a ways to go before I'd want to buy...

Just Jack said...

Salt Spring Island isn't that far from Victoria.

I could also use Sooke or Shawnigan Lake.

The point is that 60 percent of all the detached house sales in Greater Victoria now happen within a 10 mile radius of downtown Victoria. If you include Langford and Colwood that percentage flies up to 78 percent.

Those outlying areas from the core are now experiencing 10 to 15 months of inventory. You may not like the comparison of Victoria to Salt Spring Island, Sooke or Shawnigan Lake but these neighborhoods are also part of our marketplace.

A year or so ago, if you were to say that Sooke would be having 10 months of inventory in a year you would have said that was absurd too.

And while Oak Bay has some of the highest prices it is also one of the smallest players in the game with only about 8% of the total sales. Oak Bay needs the surrounding districts to support its prices. If those districts suffer so to does Oak Bay.

Like a ship in distress, its the people in steerage that experience the water coming into the ship first while those on the top deck are still sunning themselves.

We are all in the same boat.

Just Jack said...

The size of the city while important does not guarantee stability of prices. Only about 3 percent of the total stock of housing in Greater Victoria is bought and sold in a year.

That small 3 percent is what sets prices. The remaining 97 percent just load up on their home equity lines of credit and are in it for the giggles.

What that means is that your friends that want to come to Victoria have no affect on our prices at all. Neither does the person who is just sitting back and watching the market. Only those that are currently selling and actively looking to buy affect prices.

Personally, I would like to retire to Davos, Switzerland. But that's not causing their prices to go up. - Maybe its causing them to go down though.

Ranulf said...

Even if the average home fell from say 550,000$ now to 110,000$ a few years from now.

It is not certain that the younger generation would be able to afford the costs of home ownership. Like the median wage is under 20$ an hour. With a great deal of the under 35's outright unemployed, and a great percentage more not far above minimum wage.

When you look at someone who say brings home 30,000 a year after taxes, which is the median person.. and then look at the cost of transportation, food, dental, insurance, property taxes.. It is hard to imagine how they would ever deal with something like a failing roof. Or pipes bursting. Which can cost 20k to fix.

That is one of the factors in the USA where in many cities even with homes selling for 80,000$ they can't move them. Because there just is not a lot of young people coming up who make any money.

Phil said...

Anyone see the front page of the TC this AM?

I guess the powers that be didn't like that story yesterday about low sales volumes!

Paula said...

Phil, funny I thought the same thing when I saw that story in the TC. It looks like someone wanted to bury the Jan 4 story about Victoria's low sales volume.

Is VREB now making the TC their PR department? The TC needs to do more homework. Kelowna has had 83 million-dollar homes sold, and they're 29% of the population of Victoria, so one could argue that Victoria should have a lot more.
This sentence was also interesting: "Buyers of high-end homes ... want a larger house, quality finishings and products and good design"
What buyer doesn't want those things? :)

a simple man said...

Come on, TC. Really?

DavidL said...


204 million-dollar-plus homes sold in Greater Victoria


The TC article does not indicate whether more waterfront properties than usual have sold over the past year, and the reasons why properties may be selling. How about a simple comparison to see if the prices for these premium properties have been increasing or decreasing?

Whatever happened to basic journalisim?

DavidL said...

According to the VREB stats, the six-month average in Greater Victoria for December 2011 for a SF waterfront home was $1,262,413. A year earlier in December 2010, the six-month average was $1,340,869. This equals a average reduction of $78,456, or 5.9% over the past year.

There Carla, I'm doing your job for you ...

a simple man said...

a blink - 2200 Kinross Ave. 2011 assessment of $622,000. Listed at $529,900. Almost 10,000 sq ft lot.

Marko said...

"a blink - 2200 Kinross Ave. 2011 assessment of $622,000. Listed at $529,900. Almost 10,000 sq ft lot."

Not the most desirable portion of Oak Bay...curious as to what it goes for.

Mindset said...

As big purchase like homes have a lot to do with consumer confidence, thought I would share an article I just read.

Looks like the unbreakable Canadian confidence is now showing some very serious cracks.

Canadians are now Seriously concerned and worried about our economy - Poll Results

Just Jack said...

Let's assume that Oak Bay is "THE" location to live in Greater Victoria.

But where in Oak Bay is truly the location, location, location of all locations?

The most strongly in demand neighborhood is South Oak Bay. Excluding water view or water front properties, this neighborhood comprised 43% of all the sales in Oak Bay with the typical home selling at $375 per finished square foot or about $766,000.

Now the most expensive hood, excluding water view or water front homes is Uplands with the typical home going for $1,300,000. But that's deceiving because the homes are 50 percent larger and the lots are three times the size than in the rest of Oak Bay. The typical price per square foot in the Uplands is $364 per square foot of finished space.

The neighborhood of Henderson comes in last for price at $675,000 or $311 /sq. ft. Yet the poor Oak Bayer wannabees flock here to make it the second most in demand hood commanding 28 percent of the sales.

Estevan comes in at $760,000 or $345/sq. ft. But only 9% of people moving to Oak Bay would consider living there.

Gonzales - well its too small to call with only 3 sales last year, but those properties averaged $690,000 or $291 a square.

North Oak Bay came in at $689,000 or $310. With only slightly more people wanting to live there at 11%

So, the winner for location, location goes to South Oak Bay.

But, excluding water views and waterfront homes, where in South Oak Bay would that be? Well that honor would go to a property on Monterey street that sold for $585 per square foot.

So now we know where location, location, location is. Its in Oak Bay, South Oak Bay hood and in the 500 block of Monterey street.

So when someone says to you that you bought for location, location, location - You can ask them where on Monterey Street they bought.

Just Jack said...

So when someone says to you that THEY bought for location, location, location - You can ask them where on Monterey Street they live.

Leo S said...

Haha. Good one JJ.

Sweetrealtor said...

@reasonfirst. Fair Realty's main webpage has switched from PCS to PCS Pro. This change means it can't be set up by the general public from our main webpage.

To have a search account set up, simply email admin@fairrealty.com with your search parameters and the secretaries will set it up for you. You won't be solicited by any agents.

Just Jack said...

The winner for best deal on a condominium in Victoria city goes to properties that have special assessments for building repairs coming up. Those were on Stadacona and Terrace Avenue at $131 and $164 per finished square foot.

After that its the 30 plus year old condominium complexes in the Hillside hood that start around $200 a square.

And then you can pull out all the stops and show all your friends that you were the top dog in condo buyers last year by paying $660 a square foot to live in Humboldt Valley. An added benefit to living in the complex is that you're allowed caged animals.

Finally a place that will accept Siegfreid and Roy.

Leo S said...

Fair Realty's main webpage has switched from PCS to PCS Pro. This change means it can't be set up by the general public from our main webpage.

This is odd. One of the features of PCS Pro is that it allows self-management, including letting users change their own search criteria. Do you know if this is coming for Fair Realty? That would be great, as I feel bad bugging my realtor about changes when I'm not buying yet.

reasonfirst said...

Sweetrealtor - thanks for following up. I had access originally created through "admin". The link in Faith's e-mails now take me to a new webpage that works.

Sweetrealtor said...

Yes, you will be able to make your own changes to the PCS Pro after the original setup.

Just Jack said...

Have the vultures crossed the Galloping Goose and are they now storming into the city with their low ball offers.

Well, if your trying to sell a townhouse on a busy street, consider yourself an antelope dragging its leg. Your lunch for the wolf pack.

Like the townhome that sold on Cook Street recently. Back in April 2008 this home was bought for $374,000.

And today after being listed off and on for the last year and a half, it has sold for:

$327,000

All I can say is, thank God I live on Monterey.

DavidL said...

@Just Jack

Twenty years ago I worked in the gardening and landscaping profession. I had quite a few clients in Oak Bay, including on Monterey. Although there were some nice looking houses - many were dank and drafty. You needed to be less that 5'6" to comfortably walk around in the basement. Whenever the wind blew, you could enjoy rattling single-pane windows followed by picking up roof shingles off the lawn. Insulation was minimal and house heating costs were maximal. Did I mention the crumbling foundation?

All said, many of these houses need a significant amount of repairs. So why do you think that these houses are among the most expensive (per sq. ft.) in Victoria? Maybe it is different behind the tweed curtain?

Just Jack said...

location, location, location

Just Jack said...

I really don't know why anyone wants one of these old fart homes in South Oak Bay.

Most were already obsolete in the 1960's. The only people that would buy them were the English. And I thought the Scots were cheap, until I saw an Englishmen drying tea bags on a clothesline.

DavidL said...

Hmmmm ... sounds like a customer I had on Monterey who would give her West Highland White Terrier a bowl of strong tea (with plenty of milk) at 4 PM each afternoon.

I'm not making this up ...

omc said...

I gave up on Oak Bay when I realized it was going to cost me about $1M for a livable home. I am not talking mansion either, just livable. With the way the market is, and the way the market will be in 20 years as the boomers fade, your first home could very well be your last.

Energy will be getting much more expensive even in the near future and these old wrecks are extremely energy inefficient. I chuckle at the comments here about large homes in commuting areas being expensive to heat. I used to live in a tiny s. Oak Bay shack that cost at least twice as much to heat per year than a more modern 3k sqft house. Not that I would want to commute in, mind you.

I don't consider converted basement or attic space to be true living space. Again, been there, done that, won't do it again. I consider the oak bay shacks to be the most expensive homes you can possibly buy due to this. You tend to use e main floor only as the basement and attic are so uncomfortable and cold. I also notice that most converted attic space has NO insulation what so ever. You can't blow it into the roof space either. Check out the lack off frost on these homes roof on a chilly morning.

Maintenance? Well they are going to need a tonne. Go around and count the contractors cleaning up flooded basement living areas and digging up failed drain tiles after each hard rain. I am not kidding, I actually know Cromwell's # off by heart just because I have seen them so many times.

The only thing to do with these old shacks is knock them down. People are still willing to pay $800k for them though.

Dave said...

All I can say is, thank God I live on Monterey.

That would make you"Monterey Jack"

LOL......Dave#1

Dave said...

All I can say is, thank God I live on Monterey.

That would make you"Monterey Jack"

LOL......Dave#1

a simple man said...

omc - I am in complete agreement. There are few houses in Oak Bay that are not money pits in almost every sense.

If we buy here, we will build with energy and climate in mind.

Should be able to pick up a lot in the $350K range before too long (couple years?).

Marko said...

My prediction is that you will be lucky to find a ready to build lot for 350k in Fernwood in a couple of years.

The listing I had at 2529 Shakespeare (sold for 859k Net HST in) we had 30 groups of people at one open house and averaged one showing per day.

The demand for new homes in the core far outweighs supply in my opinion.

The demand for a brand new home in Oak Bay (assuming decent location) under one million would be very high.

Just look at what the homes on the corner of Runnymede and Foul Bay are going for despite the slow market.

omc said...

I will disagree with you on that one simpleman. I remember making he same predictions myself 4 years ago, and being just as sure. Oak Bay is going up, not down. And there is no pressure for it to go down. You are mentioning this knock down in a crap location of Landsdowne flats and being surprised that it is priced below $550k. I Am a bit shocked myself, but at how stupid high that is for a crap location. Just as recently as the summer of 2010 you could buy a 2 bed house in an extremely prime south Oak Bay location for that kind of money. It wouldn't even have been a knock down at that price, just small.

The market is going down? Only the lear less desirable stuff.

As an example I will use 2481 Plumer st in south oak bay. A fixed up 2 bed, 1 bath at about 1200 sqft with a crawl. Prime location on a cul de sac between Windsor park and Anderson hill , and in FAR better shape. I believe it sold for $550 k in July 2010 .

Can one of the realtors confirm this for me.

Phil said...

Or you can just rent a house in Oak Bay and keep more than a thousand bucks a month in your pocket. here or this another

If and when the CMHC pulls the magic rug out from under this market Oak Bay will be toast just like every other RE market where prices are way out of line with rents.

Rhino said...

"I gave up on Oak Bay when I realized it was going to cost me about $1M for a livable home. I am not talking mansion either, just livable."

Wow you sure have a different definition of livable than the other 99% of humans living on this planet.

Ranulf said...

Good real estate is always good. Oak Bay, Broadmead, Cordova Bay, Cadboro Bay, Oak Bay, Sidney and friends may not go down much anytime soon.

As long as there are some people who make big bucks, they will pay big bucks to live in the prestigious areas and with each other. When you live in Oak Bay you know you are living next to people who will actually maintain their home and yard.

You know people will not be suiting out their house to make an extra 1,000$ a month.

Bad real estate is only good in a boom. That is when you see insanity of houses in Langford selling for 700k. And condos in outlying lower income areas for over 400k.

a simple man said...

OMC - I agree that half a million dollars is an insane price for a non-water front or view lot in Oak Bay, but it seems prices are moving in the right direction and I am prepared to wait as my nestegg grows and the market drops. And if it never drops? My nestegg keeps growing.

Ranulf - My simple question is this, then: in the prior housing slumps did areas like Oak Bay has proportional drops in prices to other areas or did prices keep flat while others fell?

Leo S said...

Is Oak bay going up? Not that I can tell However it certainly is not going down like the overall market is starting to.

Paula said...

When looking at yearly numbers, MLS stats show that Oak Bay annual median was $785k for 2010 and $765k for 2011. The annual median for all districts except Gulf Islands was $562k for 2010 and $555k for 2011. So a slight drop for all.

Just Jack said...

When prices go down - All areas fall in value. Oak Bay would just be one of the last to fall as the market generally corrects from the outside to the inner core.

After a couple of years of a flat market the neighborhoods will stabilize and you will pay a slight premium from one area to another.

The problem that I am seeing is that as people flee the outer areas and re-locate to areas like Oak Bay to protect their housing wealth, there actions are creating areas in Oak Bay to have micro bubbles.

Here is where some of those old sayings might just apply.

"The straw that broke the camels back"

-As fewer and fewer buyers can afford some of these neighborhoods, prices would reach a point where people just opt out of the neighborhood.

"The bigger they are - the harder they fall" The prices in some of these areas are being pushed up too high, that when prospective purchasers opt out of the neighborhood, the prices have to fall a lot farther to get back in line with adjoining neighborhoods.

I don't think we are there yet. But, South Oak Bay typically has had about 37% of the total sales for the district. But lately that number has swelled to 43%. And because the volume of sales through out the bigger market place has been dropping, South Oak Bay has been robbing other areas of sales - which depresses those areas prices.

Freaky - Deaky - South Oak Bay's high prices will actually be the reason for that neighborhood market segment to fall.

Why - because sales in Oak Bay only command 8% of the marketplace. Which is about the size of the aristocracy in France in the days of Louis XVI. And that didn't work out to well either.

caveat emptor said...

"I gave up on Oak Bay when I realized it was going to cost me about $1M for a livable home."

I guess everyone has their own definition of "livable". Friends (family of 4) bought on a quiet street near Estevan recently for the low 700s. I've seen their place. It is smallish (no mansion) but certainly more than just livable (very nice actually).

Not saying the market isn't overpriced - it is. But if you believe everything under $10^6 in Oak bay is unlivable then you have high standards indeed

Paula said...

"in the prior housing slumps did areas like Oak Bay have proportional drops in prices to other areas?"

Everybody's great comments and questions made me want to crunch the numbers so here's the graph (scroll down to see the years):
Victoria Prices 1990-2000

I took the VREB Annual Averages from 1990 to 2000 (to reflect the 1994 slump - they didn't have Medians - and VREB doesn't have stats back to to bigger slump in the 1980s).

The numbers show that Oak Bay enjoyed a relative price premium (like today), but it always followed the general market up or down by roughly the same percentages.

a simple man said...

Thanks, Paula, for your work. So, Oak Bay is not immune to the world outside. The guards at the top of the Tweed Wall do sleep after all.

DavidL said...

After observing Victoria real estate trends for 30 years, I've noticed that high-quality SFH in preferred neighbourhoods (Ten Mile Point, Uplands, Oak Bay, Broadmead, parts of Cordova Bay, Ardmore, Dean Park, Lands End, etc.) tend to appreciate more slowly than average when the market is booming and tend to drop more slowly when prices are receding. There also appears to be a lag time of a couple years. Therefore, fast market corrections (up or down) are slow to be reflected in the preferred neighbourhoods while long term trends are duplicated - just a few years after the change has happened in most other neighbourhoods.

CanSpeccy said...

"Not saying the market isn't overpriced "

Surely markets are never "overpriced. They are just sometimes priced a lot higher than they going to be priced sometime soon.

Most likely the reason the Canadian housing market didn't follow the American market down beginning in 2005-2006 is that the BOC raised interest rates only 1.5% Between June 2003 and June 2006 whereas the US Fed upped its rate 4.5% during the same period.

Now that prices in Vancouver and Victoria have reached the stratosphere, common sense may be coming into play, hence the dippiness. If downward momentum picks up, it seems unlikely that prices would stop falling until there has been a substantial adjustment in market sentiment.

DavidL said...

@s simple man
The guards at the top of the Tweed Wall do sleep after all.

Yes, rats and raccoons tend to be nocturnal.

a simple man said...

CanSpeccy - well said.

DavidL - especially the ones that drink tea at 4pm.

Man, I really hate the rats here.

omc said...

To me $700 k is a lot of money. I will ask you what your friends house uses as a heating system. Does it have proper insulation and ventilation? When we're the drain tiles replaced and what is the real square footage, not including converted attic and basement. A 200 amp service?

I have known too many people who overpay for these little places and have gotten over thier heads when the big bills come marching in. if I am paying $700k I expect a house that is reasonably comfortable and large enough for a family. I also expect the house to not need extensive repairs. As a former trades person, I haven't see this in years for these areas.

The majority of the market has been on a slow retreat for the past 2 years, except Oak Bay. We are just getting more used to crazy prices as they are still going up.

Just Jack said...

I wanted to try to see if it was true that Oak Bay is in more demand than other districts in the core.

I looked at the 2009 populations of each area and compared that to the percentage of residential sales of all kinds.

I found out that Esquimalt has 7 percent of the population and surprisingly enough had 7 percent of the total residential sales.

View Royal was the same thing with 5% of the sales and 4% of the population.

Saanich East and West has 47% of the population and 40% of the sales. I attributed this to larger household sizes (the more kiddies per room factor).

Victoria was the opposite with 34% of the population and 40 percent of the sales. More single people, two people no kids. Basically, your single and move to a one-bedroom condo in the city, then you shack up with someone, then one of you gets preggers, then you move to Saanich, buy a minivan, one of you grows a beer gut and the other stops shaving their legs. Life in the burbs.

Oak Bay has 7 percent of the population and has 7 percent of the sales. So, basically neutral with no greater demand than the other hoods. Or to put it another way - there is just enough people moving to CRoak Bay as are moving to little metal urns on the fireplace.

Paula said...

It's interesting to see the comparisons of population to % sales (the new moniker for Oak Bay might stick!) I wonder if the high turnover in Victoria is partly due to newcomers testing the waters, and then after a few cold wet winters and high costs, deciding to hightail it out of here.

CanSpeccy said...

Speaking of CrOak Bay, it is scarey how old the population is. Among nine houses adjacent to ours there are 13 people with, I estimate, an average age of 76.

What happens if there's an invasion or something? Personally, I'm considering what is the polite way to hand over one's worldly goods to a member of an invading horde.

The high price of property in Victoria is one reason we have so few young people. Few couples with children can afford to live here.

As I may have mentioned before, I think the way to create a more viable community is to up the density of housing to bring down the land cost per dwelling unit.

Instead, Oak Bay council put preservation orders on mouldering heaps on half acre lots.

One form of redevelopment I would like to see is the condo mansion: A three-story-plus-basement structure designed to look like an early twentieth century mansion of ten to 20 thousand square feet, and accomodating 15-20 two and three bedroom apartments, with underground parking.

This would up the tax base and provide nice starter homes for young people.

I'd like to see this kind of development along Beech Drive through the Uplands, with a public walkway on the waterfront.

Along Oak Bay Avenue, I think they should be allowing up to at least ten stories to accommodate another ten thousand or so people in Victoria and Oak Bay. The increased density would make it viable to run a shuttle bus between the village and downtown every five minutes or less, which would reduce traffic congestion while revitalizaing the downtown.

Just Jack said...

I think its the mix of condos to houses. Its roughly 50/50 in Victoria City now. Obviously you can have more people living in a Gordon Head home than you can a condominium.

The Victoria City planners gambled on condominium construction. I think that was a mistake. The City should have gone more for town homes to encourage families to live in the City. I don't know why the city planners wanted to emulate the Downtown East Side rather than build on a sense of family and community.

Now you have concrete high rises that people cocoon themselves into at night while the creepy people wander the streets below.

Just Jack said...

Building more high rises does not reduce prices. The economic stimulus of construction brings higher prices.

Of course, after the construction boom is over and the young workers leave the city, then you get cheaper housing. But hundreds of empty condominiums brings its own problems to the city.

As for the City having more money for civic events. We've had a decade of condo construction and the city can't afford fireworks for Canada Day. The more money the city rakes in - the more money they spend. Cities don't save for rainy days.

The key is to build a community with a variety of types of housing spread throughout the community. Not to create another West End of Vancouver. You should be able to live in one community all your life. From being single, having a family, divorced, re-maried, another family and then retired. That does not include a downtown core made up of 400 to 1000 square foot sky boxes. That's just short term profit with long term pain.

Victoria does not have to de-evolve into another Vancouver. There are enough of those cities in the world to live in. We could just stay small and say no to any further development.

If you don't build it - they won't come.

AandJ said...

"I gave up on Oak Bay when I realized it was going to cost me about $1M for a livable home."

I have been over this before but it's worth repeating.

We rented an Oak Bay home 2 years ago.

2200 sq/ft. 1.5 story (converted attic space with washroom). Stuco exterior, single pane windows, asphalt roof. Basement with outside entry but less than 6' ceilings (not legal to convert anyway). Corner lot. Single attached garage (not suitable for any modern automobile except maybe a subcompact - way to narrow). Recent electrical install of minimal 100 amp service and removal of knob and tube (condition of sale).

The owners paid $725K. I see current assessment is $760K. We rented it for $1800 a month with yard care included.

I have contracting experience (built my last two homes) and I should have paid more attention before I rented this one.

Shingles needed replacing. Wooden gutters (very neat actually and I can't believe how long they lasted). I suspect by the wear on the shingles there will be further roof work required and for sure where there was some damage to the flat roofing. Drain tile needed replacing (tip: before your rent or buy call your insurance agent and ask them if there has ever been a water damage claim against the property). Windows need replacing. Kitchen was serviceable early 80's vintage (could use replacing). 1 bath on main and it was in definite need of replacement. 1 bath on upper floor and it was semi-serviceable (awkward attic/slope roof tub/shower). No insulation at all.

In the 18 months we lived there our oil bill was $8113.48

That is $450 a month! And doesn't include the three cords of wood we bought ($600) to supplement.

After 8 months we talked the homeowners into insulating and led them through the rebate process. The attic was done first and made a noticeable difference. Then the walls were drilled and filled from the outside. This made a bit of difference. But without window and door replacement it was still very drafty and inefficient.

I feel this house had good bones. A solid foundation and good construction was visible. It was just old and had not been updated or maintained over the years.

How much to fix this house? My guess was $150K until my carpenter friend mentioned permitting and fees. His estimate was $250K or more.

So there you have it. What I feel was an above average specimen of an OLD Oak Bay house and it will cost you $1 MILLION DOLLARS (say it like Austin Powers would) to make it liveable.

That's one million for a corner lot, no view, house with good bones just brought up to todays standards. I gave up on Oak Bay too.

BTW - I will never, ever, ever, rent (or buy) from Pemberton Holmes again. The condition inspection on departure was beyond belief.

DavidL said...

@AandJ
In the 18 months we lived there our oil bill was $8113.48

Yeah .. I could see that. My father's 1959 Ten Mile Point home is insulated (but not well) and costs ~$3500/year for oil. His house has single pane windows, a small amount of cellulose insulation (finely shredded newspaper, actually) in the attic and walls of the upper story, no insulation on the lower floors.

By comparison, my 1979 "well insulated" home in Saanich West costs > $500/year for baseboard heat. I has 2 x 4 exterior walls with fibreglass insulation, with a combination of fibreglass and cellulose in the attic, and double-pane windows. I'm sure that with 2 x 6 exterior walls, the heating expense would be even lower.

omc said...

That is exactly what I am talking about AandJ. I always look at a house as the purchase price AND the price of necessary repairs that would need to be done to be able to take you reasonably forward as a family home. I haven't been able to break the $1M dollar mark for years. I am a former trades person, am very familiar with what it takes to fix an old timer and am very familiar with what has come on the market in the last 4 years.

I would be interested in caveat emptor's livable house find. I haven't seen a house under $900k that is livable in years. I bet I saw it and walked away.

Just recently I was talking to an acquaintance whom had bought a shack in estevan. They were having a very hard time in the winter so I explained the grants process and even how you could blow in your attic DIY and few other things for less than a grand total. You would have ended up getting it all back by gov't rebate. their answer was that they didn't have a grand, even if they got it all back. Pretty smart purchase if you ask me; Put yourself right up against the wall with a shack that will end up flattening your bank account.

CanSpeccy said...

Re: "The key is to build a community with a variety of types of housing spread throughout the community. Not to create another West End of Vancouver. "

But Oak Bay is filled up -- there are virtually no vacant lots. Without an increase in density it will remain a largely moribund, stagnant community with many mouldering old houses and occupants to match (no offense meant, I live in OB myself and am getting on a bit).

In time, many of the cheap 1940s-1950s bungalows will be replaced by more or less monster homes in eclectic style, which may detract from, rather than enhance, the the appeal of the place.

I think we should be prepared to move over a bit and encourage intelligent redevelopment of some of the larger lots and property along the Avenue, which is not notable for outstanding architecture.

But, I agree, we don't want a little Hong Kong here just yet, although by the year 2100, there will surely be millions living on the Island and some such development will then be inevitable.

The alternative would be to subsidize urban sprawl with immensely expensive publicly funded rapid transit systems to Colwood and beyond.

a simple man said...

I will wait for the $350K lot. And then build a $400K timberframe/SIP house. And never move.

caveat emptor said...

So does "Croak Bay" have the oldest population in the CRD?

Nope the prize for highest median age goes to Sidney (55) and North Saanich (51.1). Oak Bay (49.9) is in 3rd.

Youngest, no surprise, Langford (38) and Colwood (38.7), Sooke (40.7), Victoria and Esquimalt (both 41.7)

The most kids under 15 are in Colwood (20.1%), Langford (19.4), Sooke (19.3) and Highlands (17.6). The very least % kids is Victoria (9.8%). Oak Bay is in middle of the pack with the sixth least kids (13.5%)

Sidney is in a class of its own for % of over 85s (8.8%). Versus 5.5% nearly dead in Croak Bay

caveat emptor said...

"To me $700 k is a lot of money."

Me too, but still a lot less than 1million.

Their house which I have only visited once is a bungalow, 3BR on main floor. don't know the sf., oil heat, 2x4 insulated walls, upgraded attic insulation, basement is finished but low (ranges from 7' to 6' 6". Decent size lot.

I won't argue that you get a lot of house in Oak Bay for your $. But I think the statement "nothing livable for under $1M" was a bit of a stretch.

omc said...

Depends what you call livable. I will assume your friends have a pretty good sized mortgage, and can't afford huge bills. The insulation is the cheap part of the equation. At that price you should expect to be able to go forward in the future as a family house without major renos. The lot is worth 500k, so they paid 200k for a small out dated shack. I look at the end point; if I was to end up spending near $1M and end up with only a 1200 sq ft home, I don't call that livable. Ill bet you I know your friend's house and it fits this description.

Just as an example, I keep harping on drain tiles. I would estimate 90% of oak bay houses need new ones. They will fail, and they will cause massive damage. Yet so many of these new home owners choose to ignore them because they are very expensive to replace. You should be budgeting the replacement of most, if not all of your services when you buy one of these houses. You can't ignore it and have it go away. You will end up paying much more when they fail.

I am not as bearish as many here, but all economists agree that energy will skyrocket when the economy recovers. Do you think you will still want that ridiculous old oil furnace? Those single pane windows will be a treat. You will either do the work all at once properly, or stick your head in the sand and end up doing things as they become an emergency.

I can go on forever with the cast plumbing being rotten in the ground ( they all are), undersized electrical. Have you ever seen the framing in half of these; there was no building code when they were built. At a certain level of repair the city inspectors make you bring the whole system to code. You have had the two guys with experience tell you the same thing.

Simpleman, if you must live in that neighborhood you will never regret building new. You live in the area, what do you think of the constant stream of restoration contractors mopping up messes? I don't call that livable.

a simple man said...

omc - thanks for your comments - and I agree. My wife and I have talked about all these issues in depth and in the end we almost always come up with building new as in the long run we are getting exactly what we want and we know it will be built well and with energy conservation in mind.

I also think it would likely cost less than retrofitting a century old house to do something that it frankly can't.

And about the basement around here and drain tiles. Some of the big rains last year and there were no less than three flooded basements on my short street. Two have new drain tiles put in this summer. The first money I would ever spend on a house that I was retrofitting would be on new services, including drain tiles. Then the foundation, insulation, windows, etc. So, build new - cheaper - even with the new asbestos laws.

a simple man said...

and I also think that for $700K you should get a nice, new house in a great neighbourhood.

Paula said...

omc, Could you tell us what the price range is for replacing drain tile for a 1200 sq ft 1940s/50s house with a 7 foot basement? (in case we ever get into that situation). Thanks.

caveat emptor said...

"and I also think that for $700K you should get a nice, new house in a great neighbourhood."

I agree, but unfotunately the market does not (yet) agree. At least not if your definition of "great neighbourhood" means one of the core hoods.

CanSpeccy said...

@Caveat emptor
Wow, those demographics are scarey. I can hardly believe OB is not the oldest community in the world.

We have a crisis of non-reproduction, which will make the environmentalists happy: Homo canadiensis has decided to remove himself from the face of the earth.

But was Pierre Trudeau correct when he said the state has no place in the bedrooms of the nation? Maybe the state should be more concerned about what the nation is doing in the bedroom and how many bedrooms the nation has, rather than worrying about Senate reform or bringing democracy to the Libyans.

And locally, perhaps we should be thinking more seriously about how development impacts the options available to young people who want to establish a family home.

Craig said...

"but all economists agree that energy will skyrocket when the economy recovers."

Hardly. The US, the world's biggest energy importer, has a good chance of becoming an exporter by the end of the decade at the current rate of discovery.

Further, oil prices bounced around in the $20-40 range throughout the economic boom of the late 1990s.

And further still, oil prices have more than doubled since 2007, when the global downturn began.

caveat emptor said...

omc - point taken. Once my friends install the $150 K gas furnace and replace the $150 K drain tiles they will have spent over $1 M for their Estevan crack shack which will only go down in value as the rotting corpses of their aged neighbours pile up faster than the hearses can remove them

caveat emptor said...

Canspeccy - I was surprised by the super low # of kids esp in victoria proper. That is what I hate about overpriced real estate (and overinflated housing expectations). It drives all the families out to the burbs. Thankfully the hood where I live in Victoria has quite a few kids with a good mix of owning and renting families.

CanSpeccy said...

Caveat emptor:

Re: Driving families out of town.

This is a poor way to treat those upon whose children the aging residents of the city will depend for their support in the years to come.

Why don't the urban municipalities rezone large numbers of sf lots adjacent to major thoroughfares for multi-family (from two to five or six, depending on lot size) two or three story strata buildings, constructed according to a revamped building code that specifies concrete floors and party walls, effective sound-proofing, all underground parking, and a minimum of three bedrooms per unit.

The code should allow for either a roof garden or a decent-looking steep pitched roof with attic accommodation.

The aim would be to provide more affordable family housing through more efficient land use and a smarter building code.

The end result should be fine looking buildings reminiscent of the early 20th century Rocklands mansions (which in their day were also designed to accommodate many people, i.e., a large family and their servants).

CanSpeccy said...

When I said "adjacent to major thoroughfares," I was not thinking of Shelbourne, McKenzie, or OB Avenue, but rather streets that parallel such arteries.

omc said...

Yup we used to tear these same houses down in the early 90s in Vancouver. Lot prices were about 20% lower than they are here now. Unless there is some reason why you want to save the house-footprint etc, it's always cheaper to start again.

Giving an estimate on drain tiles is impossible because of too many variables. Depth and amount of concrete and restoration work. I have heard of ones going below$15k and above$60k for what you are specifying. This is having planned ahead. If you do what caveat is doing, and believe all will be well, you will find prices are much higher in nov when the water is running into your basement. Best to plan ahead, get multiple quotes and do the sewer and water services at the same time.

Paula said...

Thanks for all the great info, omc and simpleman. I also found a document here with some maintenance and repair cost guidelines:
House Maintenance Costs
They include weeping tile replacement at $125-$200 per linear ft, so as you said it really varies.

AandJ said...

Just quoted a septic system the other day (basically the same kind of work assuming you don't need to go inside the house) and it was 35-40K.

Alexandrahere said...

I think a good buy of the week would be at 980 Kenneth. If I were younger, I would definitely look at the place for an investment property, perhaps even live on the main level for awhile.

It is listed at $288K. It has a main level with 3 beds, bath, large kitchen, dining & living rooms. Downstairs has a "new" 2011 2 bed in-law. The house is on a decent street and on a nice lot. Built in 1923, but has new kitchens and baths, H/W tank, drain tiles and oil tank.

If I liked the place I would stand firm on an offer of around $375K. The entire home would generate an income of between $2200 - $2600 per month income. Certainly better than bonds, GIC's and mutual funds of last years crop.

Alexandrahere said...

Sorry, I meant listed at around $388K on Kenneth.

Alexandrahere said...

I see the article by Carla on Victoria's million dollar home sales made Yahoo Canada news today. Google "Cities $1,000,000 homes sell by hundreds"

Dave said...

“980 Kenneth…investment property”

Horrible investment. Even with no vacancy months, you’d be lucky to achieve a yield of 4% after all expenses. I’ve crunched the numbers. I agree it’s one of the best yields you will find in Victoria right now, but I’ll take the safe 3% GIC any day of the week. Even in our present low-yield investment world, investors shouldn’t consider any local property yielding less than 10% due to the incredible risk of asset depreciation. If you really want investment property, yielding well over 10% with far less downside risk, look south. Or buy REITs. Lots to choose from in the 10 to 20% range.

If memory serves, doesn’t it also back onto Quadra? If so, you can expect worse depreciation over the next few years over other Victoria property and less rent and quality of tenants in the meantime.

Alexandrahere said...

Dave: Guess we all have to make our own decisions on how to get ahead and maybe retire early as I did in my 40's. Right now actually, you can get 3.5% over a five year term with Achieva Financial. I put my $5,000 TFSA in there for 2012.

Marko said...

"but I’ll take the safe 3% GIC any day of the week."

Just curious, who is offering a 3% GIC right now?

Speaking of Oak Bay heating bills....I have been in my condo now for 7 weeks. Haven't had to turn on the heat once (temperature ranges from 19.5 to 21.0). I think it is because there is someone living below, above and to both sides. Lucky it has been dead quiet so far - don't know whether it is the concrete build or the quiet neighbours.

Other than that it was nice to see over half of my first mortgage payment go onto principal. My monthly interest on mortgage + strata fees + taxes is 50% less than what the investor next door rented an inferior unit for.

So far so good.

Chris said...

Myself, I am fortunate to be spending only $1000 rent per month, less than half what my next door neighbour does on mortgage interest + strata + taxes. She bought her identical unit for $380,000 almost 2 years ago. From an amort table, that is $1550/mth interest (she told me it is 5.2% fixed), $280 strata, $200 tax = $2030 per month not including principle. Luckily she has a good job. The sad part is the thousand or thereabouts over and above that she is paying to principle is going out the window and more. I figure her place is now dropping at a pace of $3000 per month. I hope she doesn’t read this, or I will not be getting any more cookies for Christmas.

Marko said...

Where does a $380,000 unit rent for $1,000 per month?

I've talked to a few investors at the834 and I know one person renting a $209,900 unit for $1,215/month with a variable mortgage @ 2.25%....

Just Jack said...

"Other than that it was nice to see over half of my first mortgage payment go onto principal."


I'm missing something here. Because a mortgage is on a declining balance you should not reach the point of half your mortgage payment paying down the principle until you reach the half point in your amortization.

Or - are you doing something else? Like lump sum payments?

Leo S said...

Speaking of Oak Bay heating bills..... I watched the movie Heat this weekend.

Oh wait, that has nothing to do with oak bay heating bills.

Chris said...

It is probably closer to $300,000 now. Here are a few comparable buildings that I looked at from Craiglist in the $1000 range. The two that are over $1000 could be a little nicer than my unit.

$1325 / 1br - Luxury 1BR Condo at Dockside Green
http://victoria.en.craigslist.ca/apa/2788986475.html

$999 / 1br - ATTRACTIVE BRAND NEW DOWNTOWN CONDO 1br/1ba (834 Johnson St)
http://victoria.en.craigslist.ca/apa/2706211055.html

$1100 / 1br - 613ft - 720 Finlayson Reach, Golf course view! (Out of town, didn’t want the commute)
http://victoria.en.craigslist.ca/apa/2767044607.html

It seemed like lots of vacancies as most were willing to negotiate rent. I do not want to say the exact amount I was able to take off my rent, but it was 3 digits.

a simple man said...

2200 Kinross sold Friday night to a police officer for very close to asking. Well-priced houses (for Oak Bay) are still moving fast.

Marko said...

"$1325 / 1br - Luxury 1BR Condo at Dockside Green
http://victoria.en.craigslist.ca/apa/2788986475.html

$999 / 1br - ATTRACTIVE BRAND NEW DOWNTOWN CONDO 1br/1ba (834 Johnson St)
http://victoria.en.craigslist.ca/apa/2706211055.html

$1100 / 1br - 613ft - 720 Finlayson Reach, Golf course view! (Out of town, didn’t want the commute)
http://victoria.en.craigslist.ca/apa/2767044607.html"

Dockside - $300,000 unit.

The834 - There was one unit that sold for $179,000 and many sold under $200,000.

Finlayson Reach - $260,000 market value unit.

Marko said...

"I'm missing something here. Because a mortgage is on a declining balance you should not reach the point of half your mortgage payment paying down the principle until you reach the half point in your amortization."

Look at an amortization schedule. 2.35%/25 years.

Dave said...

Investment-wise there's nothing in Victoria that makes sense yet, especially condos. However north Victoria is at least beginning to get interesting.
2 bdrm house, nice reno, possible cash flow? 159K
nice 4 bdrm, with view, 218K

Animal Spirit said...

Dave - north of Victoria might be a bit more accurate :)

That area of Nanaimo is pretty rough these days - values will be low because of it. Is there value in a Hammond Bay investment?

happy renter said...

"I have been in my condo now for 7 weeks. Haven't had to turn on the heat once (temperature ranges from 19.5 to 21.0)."

In 1.5 years, I've never once turned on the heat in the newish condo that I rent. I justify paying a bit more in rent to live in a nice, new condo rather than a suite in a house or something like that because of the fact that my utilities have never been more that $15/month. A few of the main or top floors of houses that I looked at the last time I went to rent had outrageous heating bills.

a simple man said...

For the house we rent in Oak Bay we spend about $100-125 a month for heating, averaged over the year.

a simple man said...

I should also say that the house we had before this in Oak Bay was closer to $250 per month averaged over the year. Big, old character house (electric heat).

House we are in now is the typical OB bungalow (oil heat), but has single pane glass windows - cool and almost always wet in the winter.

Marko said...

Monday, January 9, 2012 8:00am

MTD

January

2012 2011

Net Unconditional Sales:

52 339

New Listings:

228 1,187

Active Listings:

3,358 3,283

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

commuter12 said...

RE "the burbs", don't be so quick to dismiss Langford and the rest of the "westshore" out of hand. You might not see it when you make your weekend shopping trips but these areas are actually quite nice to live in. I used to live in Saanich and I don't miss it at all. Actually hearing about all the problems with old crappy houses sure brings back memories of pulling out the wet/dry vac in a rain storm and all the other garbage you deal with in these old piece of crap houses. Don't kid yourselves when people say "they don't build them like they used to" I say thank god they don't!

Fiduciary said...

I've been thinking about yearly rent/sale(or assessed) price ratios lately, specifically for condos. I'm pretty sure this is different than the yield being discussed above.

In our current rental, the ratio of one year of rent to the sale price is 4.15%. I consider this a good deal that we're getting, especially when we look around at what else is out there (for a reasonably sized new condo). We were considering another unit where this ratio was 4.47%, but thought that it was a bit too much money for us. Now I'm wishing we had taken that place, because another suitable unit came up, but the ratio is 5.38%!

Is there an accepted range of "good deal for the renter", "bad deal for the renter", etc?

Fiduciary said...
This comment has been removed by the author.
Fiduciary said...

For the three units Marko and Chris were discussing above, the ratios are 5.3%, ~6.3% and 5.07%, respectively. My 4.15% is seeming really low now...

pod_x said...

No, they don't build them like they used to, but they also don't use them like they used to. Keeping in mind that these houses are decades old, missing about as much proper maintenance, and basements and attics were not meant for living in. I wonder how this decade's particleboard and "engineered" i-beam crap shacks and McMansions will fare by the turn of this century.

Renter said...

@Fiduciary:

Our ratio is 4.95%

Honestly, I hadn't considered doing a ratio; typically I just try to find the best place for a price I'm willing to live with.

Fiduciary said...

Renter, I'm not advocating using the ratio as a measure of either suitability or affordability, just one of "am I getting a good deal". I, more than most, am a bargain hunter, and so I apply that attitude to me housing search as well. "Find the best place for a price I can live with" is obviously much more important than a bargain or a ratio though.

commuter12 said...

Well engineered joists and OSB have been used for over 40 years now. So far it looks like it holds up just fine.

BTW Engineered wood is stronger, straighter and lighter than conventional wood. The only major disadvantage is in a fire that stuff burns like paper.

Marko said...

something like engineered joists are so much better than 2x10'' joists for a variety of reasons; however, a lot of builders continue to use 2x10'' as the buyer can't see the cheaper framing at the end of the day.

DavidL said...

Interesting discussion about ratios. I decided to take my mortgage payments, property taxes, house insurance and an extra $300/month for basic home maintenance/repairs - then divide by the (recently) assessed value .... and arrived at a ratio of 4.6%.

Now ... if I were to purchase the same house with 10% down and a 25-year mortgage, add the same property taxes, house insurance and an extra $300/month for basic home maintenance/repairs - gives a ratio of 5.75%.

happy renter said...

My ratio is 4.04%. I also hadn't thought about rental "deals" that way...

Leo S said...

The more common comparison is price to yearly rent ratio, where 1-15 would indicate better to buy, and 21+ better to rent.

patriotz said...

"Where does a $380,000 unit rent for $1,000 per month?"

Chris said it sold for $380K two years ago, not $380K today, Marco.

:-;

Just Jack said...

A townhouse sold recently in Oak Bay for $325,000. Previously the same home sold in June 2003 for $245,000. An increase of $80,000 or 32 percent in almost 12 years.

A definite under performing asset in relation to how house prices have done. The reason for this relatively low appreciation - the complex has rent restriction of 55 years and older.

In the heart of the retirement center of Victoria, surrounded by gray panthers, in a building just for the elderly.

What happened to all those retirees coming to Victoria?

happy renter said...

From today's Globe:
http://www.theglobeandmail.com/report-on-business/economy/housing/rbc-bmo-warn-on-housing/article2297346/

a simple man said...

Al but the wealthiest retirees can't afford to retire here and sustain a grocery budget. Unless they rent!

Marko said...

"Chris said it sold for $380K two years ago, not $380K today, Marco."

In that case I bought my pre-sale 2 years ago for under 200k. Now it is assessed at 245k and probably worth 240k on the market.

vw said...
This comment has been removed by the author.
vw said...
This comment has been removed by the author.
Just Jack said...

A return on your investment of 7.5% does seem good. But, there are few investments that receive that high of a return today. If they do get 7.5% those investments will be even more riskier than real estate.

For example, a bond with a similar term as a mortgage, like a 5 year Canadian bond?

Or the yield on an Iranian bond for a nuclear power plant. Like that's gonna be here 5 years from now!

Trex said...

I thought I would throw one out for opinions and advice.

First, assuming that the real estate market is going to remain flat or much more likely to trend slightly downwards for the next several years.

Next, lets assume that a buyer is determined to buy into what will probably be a gradually declining market for the forseeable future.

Thirdly, lets assume the buyer is fixed upon a relatively small pool of properties: Caddy bay or even
Mill bay.

I am looking for advice upon how to deal with the more difficult(read overpriced) properties.
Do you insist your realtor place an offer that the owners would see as a lowball, possibly tens or even 100k under asking?
Or do you just move on?
This assumes that assesments and local comparibles justify the lower price.
Just wondering how others deal with the issue in todays market?

Just Jack said...

If your offer is fair market value in relation to what is currently being paid, then its not a low ball offer.

Sometimes vendors will reject a fair market value offer if it is considerably lower than what they are asking when the listing is new. The vendors think a better offer will come along later. That may not happen in a flat or declining market, so you might get a call back. Which is really cool, because you know you were the highest bidder then. So ask for additional concessions like the drapes, washer, dryer, furniture, the dog.

But, let's forget about being fair. Who wants to be fair in a declining market. If you have decided to buy in a declining market - you want to be ahead of the curve. You don't want to pay today's price - you want to pay next years price.

So can a low ball offer work!

Yup.

But it has to be on a property that other people are NOT willing to buy. Like an older condominium that needs repairs, but no one has a grasp on what it will cost to fix that building.

Uncertainty breeds opportunity.

If that condominium has not sold in the first 60 days - then the chances are - you are going to be the only bidder. And if that property is also under a court ordered sale (which a lot of them will be) its time to feed on the carcasses of those less fortunate.

Just Jack said...

Speaking of condominiums that need repairs.

What happens if you are a happy home owner of a 35 year old condominium and the strata council informs you that they need to have an engineering study done on the complex.

It may be in your interest to sell before the engineer drops the report and the hammer on your little nest egg.

Condominiums have only been around for a short time. The oldest condominium building is about 40 years old now. That makes them "Cougars" in human years. Still attractive, but in need of a lot of work in the next few years.

And that means upgrades to windows, roofs, balconies, etc.

Strata Councils are now required to get a depreciation analysis on their condo buildings to make sure that the contingency reserve is large enough.

Bad news - the contingency fund is never large enough. Rehabilitating the exterior of a small low rise complex of just 40 suites will start at a million dollars and go up from there. And that means Special Assessments and or higher monthly strata fees.

And if your council does nothing - then you're left with a condominium that is almost unmarketable unless you discount the price of your suite deeply.

Rhino said...

Trex,
From my experience the problem you will run against is most sellers either don't know or don't believe its a buyers market.

The key (easier said than done) is to not fall in love with one place. Put together a collection of 4 or 5 properties, along with what you think the fair value is/what your willing to pay. Then go through the list making offers, and hopefully one of the sellers blinks.

pod_x said...

Those new strata rules are gonna shake a lot of skeletons from a lot of closets. Condos in BC have enjoyed very low strata fees. Compare to say, Toronto, where it's not unusual to be shelling out $4-500 a month for a typical condo, once it's out of developer's hands. I doubt there is any condo in BC that has a sufficient contingency fund and fees to deal with future maintenance.

Just Jack said...

Absolutely, on the condo issue.

An additional one to two hundred dollars a month would have to be set aside to build up a contingency to be used 25 years from the day the building was constructed just to repair exterior walls.

Although it would be a nice business to get into financing these repairs. Good for insurance companies that need a steady cash flow with a high security of the capital invested. The insurance company would just have the strata council assign the appropriate level of strata fees over to the insurance company each month.

And oh yeh, get the loan insured by CMHC.

happy renter said...

"Condos in BC have enjoyed very low strata fees. Compare to say, Toronto, where it's not unusual to be shelling out $4-500 a month for a typical condo, once it's out of developer's hands."

There are usually a few differences between Toronto and BC (or at least Victoria) condos, though. First, nearly all condo buildings in Toronto have a front desk that's manned by one or more live bodies, and that's expensive. I don't know of any Victoria buildings with door people / concierges. Second, the typical Toronto condo building has more amenities than the typical Victoria building: a swimming pool is pretty standard, and along with that comes much bigger maintenance fees. In other words, I'm not entirely convinced that condo buildings in Toronto are better off than condos in BC in terms of contingency funds because their costs are typically higher.

Having been a condo owner and seen a senseless strata council in action (making foolish/expensive decisions, missing warranty deadlines, etc.), I couldn't ever buy a condo again. The fact that other people (ie., the strata as a whole) are in some way in charge of your investment just makes my stomach turn.

Leo S said...

Having been a condo owner and seen a senseless strata council in action (making foolish/expensive decisions, missing warranty deadlines, etc.), I couldn't ever buy a condo again. The fact that other people (ie., the strata as a whole) are in some way in charge of your investment just makes my stomach turn.

Bingo. I've heard enough stories about brainless strata councils and special assessments that I have no desire to own a condo whatsoever.

And now that the property ladder is broken, there's no longer a reason to buy a condo if you don't intend to live in one long term.

Paula said...

"There are usually a few differences between Toronto and BC (or at least Victoria) condos, though."

Agreed - there are quite a few differences. In BC, they typically don't include central HVAC, cable, internet, 24-hour concierge, valets, huge fitness facilities, shared catering kitchens and dining rooms, or taxes. In Toronto and Montreal, they can (it varies by building). Some examples (but not a comprehensive list of things included):
Toronto Condo Sightseeing
or
Condo Fee Lists

In any case, some people like the lifestyle and having maintenance taken care of (especially younger singles and less mobile older folks). I've experienced it but now I like having more control over everything - maybe it's because of advanced age :)

Renter said...

And when you are on the strata council, and trying to make good decisions regarding maintenance and upkeep and revitalization the owners will fight you every step of the way because it "costs too much money". You try to save money by having work parties where we do some of the grunt work ourselves - and only the strata council shows up (and not even all of them).

Thankless job. And that's not even considering the internal politics. Glad I'm out. I'll never own in any kind of strata (yes, that includes bare land stratas) again.

Just Jack said...

Back in May of 2006, you could have bought a pre-construction condominium for $259,900 in the Reflections in Langford.

Then flipped the condo two years later for almost $300,000. At that time you could have come on to this blog and ridiculed the bears.

Today that same condo sold for $245,000 despite the low interest rate environment, larger population, retirees, and good weather.

patriotz said...

"In any case, some people like the lifestyle and having maintenance taken care of"

But some other people get it cheaper. It's called renting.

Marko said...

You really have to be a people person to be on the strata council as I am finding out.

Paula said...

Speaking of the buy vs. rent question, there was a great article last year in the Guardian comparing British tendency to buy and the German tendency to rent. "young Germans don't feel too frustrated if they cannot get on the property ladder, whereas the Brits do."

The articles lists many reasons that include long-term falling prices in Germany, taxes, and the local norms that people get used to.

Brits buy homes, the Germans rent – which of us has got it right?

caveat emptor said...

OT Question - what are the absolute rock bottom fixed rate mortgages that people are seeing out there - assuming excellent credit and very low ratio mortgage? Is anyone being offered below 3.29%?

I am wondering about locking in to a low seeming fixed rate, vs riding out a currently super low variable to end of term (1.5 years)

a simple man said...

Check out this mortgage rate comparison tool.

Should be able to get a few notches lower even if you have a good credit rating.

Buying out a mortgage can be pricey - find out from your bank how much it would be or if they are willing to waive it.

patriotz said...

"Brits buy homes, the Germans rent – which of us has got it right?"

The answer is neither, since at current prices and rents it's cheaper to rent in the UK and cheaper to buy in Germany.

Interesting tidbit from the Economist article of last month: "In the late 1990s the average house price in Germany was twice that in France; now it is 20% cheaper." And France is currently cheap compared to the UK.

You can also substitute Canadians for Brits and Americans (now) for Germans in the above.

DavidL said...

If you are shopping around for a mortgage, here's another site to consider: http://www.ratesupermarket.ca/best_mortgage_rates?province=British-Columbia

Also, a local mortgage broker may be able to help you shave off an additional amount of the posted rates.

By shopping around, I have managed to save $10K's in interest on my mortgage.

DavidL said...

@caveat emptor
The Mortgage Rate Outlook panel at RateSupermarket is predicting that fixed rates will be going down ... so you may want to enjoy your low variable rate mortgage for a while longer: http://www.ratesupermarket.ca/mortgage_rate_outlook_panel/

I have less than 3.5 years in my own mortgage and thus plan to stick with a variable rate.

Marko said...

Interesting post on usedvictoria...

"My family has been renting for years, but would now like to buy a home. We have good jobs and make a decent income, but due to the excessive rent everyone asks (currently paying $2k/mo. + all utilities for a house with lots of issues), we can never save enough for a down payment.
We have several teenage children (blended family), so a condo just won't be enough, which is why we have to rent a whole house, which is why we can't save for a down payment. A few years ago when banks accepted zero-down mortgages, we would have been fine, but now...
I know we qualify for a mortgage, it's just the down payment that is the issue. If anyone has any ideas, we would love to hear them.

Thanks."

a simple man said...

they can't afford to own - they just don't know it.

Just Jack said...

The first thing they are going to have to do is take out RRSP catch up loans of $25,000 each. And get those loans paid off in under 5 years. Once those are paid off, then they can use them as a down payment on their home.

If they can't pay the rent and the RRSP loan payment then that's a test that they can't afford the home. Worst case scenario, they end up with RRSP's

Or, they can be less than truthful, and get creative with their finances and buy a house. Then they find out they can't afford the home. Lose the home to foreclosure and be a hundred thousand dollars in debt.

Bet they go for the house!

Leo S said...

Oh that evil government. If they had just stuck with those zero down 40 year mortgages that nice family would be home owners right now.

Nevermind them, if they would only extend it to 60 years, just think of all the other nice families that could be home owners. After all they are so close to qualifying for a 40 year mortgage, and have good jobs, why make them waste their money on rent?

caveat emptor said...

Thanks all for mortgage suggestions!

Re the Used Victoria posting. I do feel for them. Owning a house should not be an unreasonable aspiration for a family with two incomes, but high real estate prices make it so.

I'd have to agree though, if they can't save anything renting it's going to be tough pulling off buying in Vic.

Let's say they get a $400000 loan. They will be paying 2000ish a month on the mortgage, plus taxes, plus maintenance, plus all utilities and houses in that price range may well have "issues" just like their rental

patriotz said...

"I know we qualify for a mortgage, it's just the down payment that is the issue."

OK, so they say they can afford the mortgage (+ other expenses implicitly) to buy a house. This monthly cost is greater than the rent for the same property, as we all know.

But they can't save a down payment.

What's wrong with this picture?

What happens when governments make it easier for families like this to buy?

omc said...

Just jack's suggestion of the loan to catch up on outstanding RRSP limits is an interesting one for this case. They could potentially borrow up to $50k, that could be used as a down payment later. Also, they would receive a considerable tax refund that would take care of a good chunk of that debt. But it would take discipline. That's what is lacking from many in this situation. What are the chances that they would buy before the loan is repaid? If they did, repaying the loan while paying a monster mortgage.

I am no longer seeing buying as more expensive than renting in this town. Sorry, but half of your payment goes towards principle now and the rents are mostly ridiculous that I am seeing. What can be a killer is the poor quality of the housing stock though. I see too many stressed out/ maxed out families with flooded basements when I drop my kids at the local elementary.

The listings seem to be piling on a bit stronger, earlier this year. Mostly crap so far, but it is pointing towards a decline where this is usually the expensive time of year.

Leo S said...

I am no longer seeing buying as more expensive than renting in this town.

But it is, by definition, more expensive on a month to month basis.

Sorry, but half of your payment goes towards principle now

Sure, and if your home equity was like some sort of savings account it would make sense to buy. But through the magic of leverage, it only takes a percent or two decline to completely wipe out that equity. So now you're just paying the higher monthly cost for no benefit.

As for that family, as patriotz said, there is no way they can afford to buy without making a change to how much they save. $400,000 mortgage at 3.2% is $1725/month + taxes = $2000/month. So, homeowner paradise for about a month until the first thing breaks and they get kicked out because they can't afford the cost of the repairs. A friend of mine bought from a couple in a similar situation. Maintenance was neglected, and the oil tank was always only filled to the minimum level. Eventually they were forced to sell. Luckily still in a time of rising values.

nan said...

That family has 3 options:

1. work harder to save the DP (more hours)

2. Spend less i.e. do a full budget analysis and cut out all the waste. If they have decent jobs (i.e. at least 7k/ month between the 2 of them before taxes) they should be able to save at least $1,000/ month. Save 5% down for a 400k house in 20 months. If they don't have good jobs, see #1.

3. Rent.

If they're at at least 7k+/ month, here's a few easy suggestions for #2 that this family can probably use:

1. Buy cheese and meat at costco ($50/ month)

2. live closer to work ($50/ month + on gas + time)

3. rarely versus regularly go to starbucks ($100/ month)

4. Only own one car and live with the inconvenience ($500/ month)

5. Shop at Fairways and the Root cellar (or some other local market)instead of Thriftys ($100/ month)

6. Never buy ANYTHING without thinking about it for a day first - you'd be amazed at how little you actually go back for. (probably $500/ month)

Theres $1,300 per month right there.

I would wager that what these people lack is discipline, not income or gov't subsidies.

caveat emptor said...

"$400,000 mortgage at 3.2%"

It may be worse than that. Based on their described situation they may not be prime credit risks and could easily end up paying more interest than that...

Just Jack said...

Get rid of cablevision and your standard phone line coming into the home.

Buy a freezer and take advantage of grocery store sales. Buy non perishable goods in bulk quantities. Reduce your electricity consumption. Wear a sweater at home. Reduce unnecessary driving. Bike to the store, walk the kids to school, car pool.

If your single and with no dependents - you don't need life insurance.

If your biggest asset is a collection of Bay City Roller albums - you don't need tenant insurance. Psychiatric help yes - but not tenant insurance.

Just Jack said...

Forgot the biggest one. Get rid of most of your credit cards. Try to have, no more than two credit cards. And make sure you call those companies up and cancel them.

A couple of things will happen, your credit standing with the bank will increase (they don't like the idea that you have a dozen credit cards with $10,000 limits on each) and those credit companies you call will offer you a lower interest rate on your card!

They don't want to lose you.

a simple man said...

90% of the consumer goods I buy I get tipoffs for sales from this site - it has literally saved me thousands every year.

http://www.redflagdeals.com/

Trilobite said...

Hi JJ,

I agree that too many credit cards may be an issue but if someone needs to worry about the rate, then that means he/she is carrying or thinking of carrying a balance. If so, it's really simple, rent and make sure that you absolutely never have to carry a balance.

Trilobite said...

Speaking of balances and redflagdeals.com, sometime back I found a code there for an MBNA balance transfer at 1.99% for the 'life of the balance'! So I tried it out and got 30K which I invested elsewhere at a higher return ... Of course, they probably hope that I'll miss a payment to reset the rate but that won't happen.

Fiduciary said...

Ah, I love RedFlagDeals (RFD). A lots of the deals are slanted towards electronics, but I'm a geek so that works out well for me.

a simple man said...

This house seems like it is pretty good for the price, in comparison to other century old houses in Fairfield.

a simple man said...

try this

a simple man said...

try this

Leo S said...

Going on $900k for a duplex? No thanks.

Olives said...

I have to strongly disagree with the suggestion to cancel tenants insurance to save a few bucks. It is not the contents coverage that is the most valuable coverage in the policy, but rather the liability coverages.

Leo S said...

The very very unusual Mr Scott (2636) sells again. This time for $340,000.

Marko said...

It was an assignment. Someone bought it and then flipped it.

Marko said...

1047 Bank just went over asking...little surprise there.

patriotz said...

"I am no longer seeing buying as more expensive than renting in this town."

Then give us an example of buying being cheaper than renting, all expenses, appples to apples. And mortgage principal is not an expense.

Sorry, but I am not going to take anyone's word for it.

Just Jack said...

I was a bit hesitant on the tenant insurance. The liability issue did not enter my mind.

Just Jack said...

I was a bit hesitant on the tenant insurance. The liability issue did not enter my mind.

Just Jack said...

If you could buy a two-bedroom condominium in town for $160,000. Then the cost of owning would be the same as renting.

But the only ones that I can find like that are foreclosures with unpaid Special Assessments for repairs.

Which, by the way, are not a bad deal if you have $160,000 cash laying about. If your buying the condo as an investment you can deduct the cost of the repairs when you dispose of the property. This is not something for the everyday first time buyer - this is more for those who have deep pockets. Or the bank of mom & dad. (check with your accountant first if this is applicable in your circumstance)

Paula said...

Does anyone have any opinions about why there isn't more of an uproar about Victoria's high property tax rates? (Victoria’s mill rate is 3.7731 per $1,000, while Saanich’s is 3.2034 and Oak Bay’s is 2.9257).

It's mentioned on http://openvictoria.ca/

Just curious if this has influenced your opinion of Victoria as a home base vs. the other municipalities and if there's concern about future increases.

Marko said...

Personally, when I factor in the fact the more than half of my FIRST mortgage payment went onto principal it is about 50% less to own vs renting what I feel is an inferior unit next door to me (10 sq/ft smaller).

In general I think condos up to $1,500/month are probably cheaper to own and above $1,500/month cheaper to rent.

There are obviously a lot of other factors such as cost of strata fees, etc.

It is common to see 200-230k units renting for $1,000 to $1,200; however, it is not common to see 600k units renting for above $2,000 - $2,300/month.

Similar concept applies to homes except the analysis is a bit more complicated because of suites.

phil said...

I know owners whose maintenance and property tax alone is equivalent to my monthly rent. It's only the people who have never owned that don't understand all the costs. Well, that's not completely true. Many owners never fully understand, other than wonder why they have no money at the end of the month. And don't even get me started on the opportunity cost of negative return real estate over positive returns elsewhere. Anyone who can show me a place that's cheaper to own than rent in Victoria and I will show them my flying pet pig.

Introvert said...

I know we qualify for a mortgage, it's just the down payment that is the issue. If anyone has any ideas, we would love to hear them.

My view is that this family should not, at the present time, attempt to buy a house in Victoria without a 10 or more percent down payment.

Perhaps in the boom years 5% down was sufficient, because if personal finances took a turn one could always sell and at least break even, if not make a small profit. But in today's market, if one had to sell under duress, it likely wouldn't be pretty.

Leo S said...

So let's compare the 834 then. Units are for rent between $999 and $1950.

Units for sale or sold in the past are from $225,000 to $589,000. At 3.2%, 30 years, 5% down, that's $918/month for the bottom end, to $2411/month. Add taxes and condo fees you're around $1200 to $2800.

Cheaper to buy in the 834? Not really. If you subtract the entire principle then you might be a bit better off for the absolute cheapest units, but that's about it.

Marko said...

Leo_S,

You are only looking at MLS® sales. The majority of units sold were never on MLS®.

The cheapest unit sold for $179,900 and there were a number of 530 sq/ft units that sold below $200,000.

As of today a big bank is offering 5 year fixed at 2.99%.

Assuming your mortgage is $190,000, 2.99%, 30 year amortization = $798.13 + $150 strata fees + 100 property taxes = $1,048.00. During the 5 year term an average of $362.762 will apply per month to principal.

$1,048.00 - $362.8 = $685 per month. Similar units rent for $999 to $1,100.

I went with a variable mortgage which is in the low 2s (was possible a few months ago) and it makes a very large difference as to how much is applied to principal.

Leo S said...

You are only looking at MLS® sales. The majority of units sold were never on MLS®.

And you're comparing pre-sales and extrapolating that out to the general rental market. How is that valid? Last place that sold for 530sqft was $240,000 and if I understand it correctly, even that was before occupancy, so I would expect a current unit to sell for higher.

As of today a big bank is offering 5 year fixed at 2.99%.

With significant limitations, but ok. 0.2% isn't going to make much difference.

I'm not saying you're not better off buying the pre-sale, it sounds like you are, but that's a pretty unique confluence of factors.
1. You bought the presale 2 years ago.
2. You're on the variable, when most people that would be looking at an entry level condo would get or be forced to take the fixed rate.
3. You're a realtor, so if you want to sell your costs are lower.

Even with all that... I don't know if I'd take the deal. How long are you going to be happy with that condo? 5 years maybe at the outside? So in a flat market with transaction costs you'll probably about break even to rental cost without any of the flexibility.

Leo S said...

If your buying the condo as an investment

"Aargh, Just Jack really needs to learn the difference between you're and your" - My Wife.

:)

Marko said...

1. Just down the street on Johnson there is a finished condo listed for $194,000. Rental value ~ $950/month.

2. In my example I used a fixed rate mortgage, but yes if you have a mortgage in the low 2s the numbers look better.

There are some solid pre-sales on right now that are probably even better deals than the 834. For example the studios going for $169,900 including HST at the Mondrian will probably rent for $950/month. Certain units at the Bayview Promontory also offer solid value in my opinion.

As far as my condo, not too concerned. When I am ready to move on the rent will cover all the costs plus some.

Personally, there is also value I derive from owning. I upgraded my thermostats to LCD programmable ones, changed a few light fixtures to my taste, bought furniture size specific to the unit, etc....small things I probably wouldn't do if I was renting.

I have nothing against renting. I just don't buy the argument that renting is cheaper in all situations. I will agree with you that renting is certainly cheaper in the majority of cases for high end-condos.

Just Jack said...

His brain moves too fast to be concerned with grammar. It's an on-going battle here. :-)

Just Jack's wife

Just Jack said...

Oops, and spelling. Seems I have the same problem. :-)

S2 (JJ's wife)

Iggy_12 said...

How about some sell/list numbers please?

patriotz said...

"Just down the street on Johnson there is a finished condo listed for $194,000. Rental value ~ $950/month."

No REIT would go near numbers like that.

You may be breaking even on cash expenses at time of purchase with current interest rates, but you are ignoring a major expense - depreciation. Some time in the future that condo (and every other one) is going to be torn down, or more or less rebuilt.

Not to mention you are making a huge bet on interest rates staying at historic lows for decades.

I bought into the RE market when houses were going for a price/rent of 100 and nobody's going to convice me that a condo is a buy at 200.

Marko said...

"but you are ignoring a major expense - depreciation. Some time in the future that condo (and every other one) is going to be torn down, or more or less rebuilt."

You are ignoring the fact that the market at some point, whether it be 5 or 15 years, will turn up and there will be capital gains.

As far as rebuilding probably not in the current buyers' lifetime.

Houses make better investments long term as the land doesn't depreciate in value like improvements do. No doubt about that.

If a ran numbers on homes with suites it would also show that the lower end is cheaper to buy but then we get into the hole debate of suites, maintenance costs on an older house, etc.

Just Jack said...

Not to mention "you are" making a huge bet on interest rates staying at historic lows for decades.



................
Great Leo
Now U R having everyone worried about using contractions altogether.

Just Jack said...

Technically, land does not depreciate. Depreciation is a loss in utility and that doesn't happen to land unless it is impaired with contamination.

But land does lose value, because it's (sorry Leo) value is determined by market forces. When a mining town closes down, the land didn't depreciate, the land just became less valuable.

It is possible that land value in Victoria will be lower in 15 years (in real dollars). Because that's when baby boomers will be reaching the end of the typical life span.

Almost guaranteed that in 15 years from now, the typical Victoria home will cost less as a multiple of income to buy than a home today.

Leo S said...

But land does lose value, because it's (sorry Leo)

I'll allow it.... this time. :)

The market seems a bit more active than the same time last year, at least in the upper end. Nice to see some new stuff coming on.

And could we get a new post? My thumbs are getting sore from all this scrolling..

Rhino said...

Anyone else notice the 2.99 5-year rate by BMO is suddenly big front page news? On front page of cbc website, and a top story at cfax on the radio this morning. Pumpers must be getting desperate.

DavidL said...

@Rhino

Yes, I do find it surprising that 5-year fixed rates are being offered at a lower rate than current (and likely future) inflation rates. Fixed rates a beginning to look more attractive than current variable rates.

However, since 2006 - my variable rate mortgage has been consistently below the inflation rate ... which is good, because my income has been lagging behind inflation as well.

From the bank's perspective, they can still make a profit as the bonds rates are so low.

@Leo S

Ditto on the new topic. HHV, where are you?

DavidL said...

@ Leo S
My thumbs are getting sore from all this scrolling..

Click on the page then use the CTRL-End key combination ... ;-)

Leo S said...

Click on the page then use the CTRL-End key combination ... ;-)

Yes, but not on the phone.

DavidL said...

On my Android phones (viewing the mobile version of Blogger), I click the link with the "200 comments" rather than the arrow on the left, and this takes me to the bottom of the posting. I'm not sure if this works for other phones ...

«Oldest ‹Older   1 – 200 of 218   Newer› Newest»