October wrapup. It ain’t pretty

Another month another increase year over year strengthening of the market.   In fact the president of the VREB reports that “This is the twenty-ninth month in a row that we’ve seen monthly sales increase over the year before.”   How rare  is that?  Well it hasn’t happened since 1997 which is where the data starts.   Runner up is 18 months of consecutive YoY increases starting in 2001.   It has been a very gradual but also very consistent ramp.

The VREB is justifiably excited about the market, emphasizing that now more than ever you should be consulting with your favourite all-caps professional to get in on the frenzy with minimal stress.   After all when it comes to dropping $593,000 on the median house, it should at least not be stressful.

How is this October compared to others?  Pretty tight, with the hotter Octobers in recent memory being 2009 when the market bounced back, and 2007 before it collapsed.  At 4.6 months of inventory, we are still a ways off the insanity of 2002 to 2005, but the market in the core might be approaching that level of activity.



If you’re a seller you’re breathing a sigh of relief.  After 5 years of languishing the market is finally picking up a bit.  But what to do if you are a buyer?   Wait for better conditions in the spring or jump in now before it gets even more insane?  Will a legion of the white haired anxious to retire liquidate their investment properties into the spring market?  Or will we be tossed into a 2003-era insanity where buyers have to show up with suitcases of cash to secure anything?

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174 thoughts on “October wrapup. It ain’t pretty

  1. I think you would find several contractors that would build you a new home in exchange for the vacant lot.

  2. Agreed – figured that here would have some good views and advice on the steps to take. It might well be an easier thing to do if we are able to get a prospective buyer of the property lined up before hand – and that would likely be much easier after discussions with developers who may be able to assist with the project.

  3. I think you’ve gotten some good advise from all sources. Just realize that the bank appraiser may not use those two sales along Dallas road if in their opinion the sales do not represent general market conditions. That might change everything for you.

    In my opinion, and that would be echoed by my insurance carrier and institute, there has to be more support than just two contract sales from a single developer.

    If I were doing the appraisal I certainly would discuss the two sales but also add why I am or I am not relying on them in the reconciliation of value.

    Unfortunately, you don’t get the choice of who will appraise your property. But I will assure you that if the assignment comes across my desk I will not accept it. I don’t want anyone thinking that I have a preconceived opinion of the value or direction in value of the Property.

  4. Detached homes do sell for more than attached strata titled duplexes. I don’t know if I agree that construction costs are lower by any quantifiable amount.

    And I would hope that you wouldn’t build a side by side duplex with units that are identical to each other. At the price point you’re looking to sell, a buyer doesn’t want the same house as his neighbor. Again that goes back to your target market. That somewhat unique individual who marches to a different drummer than the majority of us. Heck, the person could work in IT and might want a room just for their collection of longboards or a rock climbing wall in the living room. Personally I’d want a basketball court and a mirror disco ball.

  5. Absolutely, I get asked to do these appraisals where someone has decided to subdivide. The bank has to have the property valued as it is today and valued upon completion of the subdivision. The bank has to determine the security of the loan. That might mean two separate mortgages. One on the new home on the smaller lot and another mortgage on the vacant site. New mortgages at new rates.

    If the proposed subdivision does not meet the loan to value ratios then you will not be permitted to subdivide or you will have to pay out the mortgage and get financing from another bank. That can be tricky depending on different bank lending policies. Some banks will only lend on 60 percent of the value of a vacant site.

    You will have to talk with your bank after you talk to the city.

  6. Determining a lot value along Dallas road for a 2900 square foot lot is extremely difficult or extremely easy depending on how much is based on “gut feeling” or opinion and how much on solid analysis.

    The easy way is to list half a dozen dissimilar lot sales and then make a statement such as “in my expert opinion”.

    The other way is to research medians and paired sales of sites and properties to determine appropriate factors and adjustments and express them as a price per buildable square foot in accordance with their zoning. The vacant site analysis could be cross checked against a residual cost analysis of recent sales of new homes. This would be presented along with a smaller judgement sample in a chart format to assist the reader in understanding the adjustment process and showing the range in value after adjusting for differences between the Site and comparable sales and then determining the most likely price that would be considered fair to both buyer and seller as at a specific date under normal marketing conditions.

    That value would represent a ready to build site. If the site required additional site preparations then those extra costs would be subtracted from the site value. For example if a ready to build site had a value of $625,000 but the site you are looking to purchase has a rock outcrop, requiring another $25,000 to pop, in order to make it readily buildable then you should buy the lot at $600,000 not $625,000.

    One way is generally “free” in the hope of listing the property. The other might cost you $300 or $400. At this point I don’t think you are far enough into a decision to pay for any analysis. Better just to canvass several agents on their thoughts.

    As an example an acquaintance of mine was disappointed in what the agents were telling him that his “subdividable” property was worth and wanted me to value the property for him to prove how “wrong” the agent was.

    I told him that I would do the analysis for free – but as soon as he started to influence me in my analysis the report would cost him $750. Once he realized that this would cost some money, he became more accepting of the various agents opinions.

  7. I’d say small lot subdivision as well Janice. A duplex has lower construction cost, but you’ll have to live with shared walls and the valuation per unit will be lower. You can run the numbers but my guess is the difference is quite significant, both quality of life wise and financially.

  8. Totoro – those are the numbers that seem to correspond fairly well with my numbers, that a subdivision proposal winds up with a new house on a smaller lot, with a slightly smaller mortgage and a much higher home value. I know there will be hoops to jump through – but do not see an existing mortgage as being that big of a barrier – if the proposal is sound and ultimately leads to a less risky loan (a smaller loan on a property with a greater value, or even a larger loan that is again lower on the debt to value ratio). Just Jack – I don’t think any bank would take a proposal seriously without having the potential project appraised for end of construction value – I just see the end of construction value as being much higher than the existing. There is some debate – which is more desirable, a small lot subdivision or a duplex? I’m tempted to think small lot subdivision.

  9. If you can keep the building costs under $200 a square foot (excluding basement area) then you’ll recover those costs in the marketplace. If you are building a 1,700 square foot home with an unfinished 500 square foot below grade basement with a single wide garage then $340,000 would be recoverable in the marketplace. .

    Go over $340,000 in construction costs and then it becomes really dodgy if those extra costs are recoverable in the marketplace.

    Again remember that as the size of the home increases the price per square foot rate decreases. 2,000 square feet might be $185 a square, 3,000 square feet could be $150 a square depending on economy, standard or custom features.

    The above is a unit in-place cost method. If you are creating a spreadsheet of specific items and labor costs that is a quantity survey method of costing. The latter is more detailed and mostly used for insurance purposes.

    Or you could think of the difference between the two as being replacement cost new and the other as reproduction cost new. Market value is highly related to replacement cost of homes with similar utility. In contrast “special purpose” buildings such as a 150 year old downtown church or the Legislature buildings would be associated with reproduction costs.

    When you read in a listing that the home is selling less than the cost to build. The agent is most likely referring to reproduction cost which could mean the home owner went over budget when building the home.

  10. Oh don’t forget, the building permits for Capital Region is @ an all time high right now according to the press.

    For the common folk such as us, it just means waiting a little longer for the trades guys to show up 🙂 and a little longer in the queue to get your permits (if they weren’t already a big enough pain).

    Do this for lifestyle reasons, which I think you are, as the economics no matter how you slice it are going to be marginal at best IMHO.

  11. Just Janice,
    Some quick info points for you considering u have a 7200 sq ft lot on Dallas road. We have a 9800 sq ft lot in Oak Bay 1 block from the beach and just finishing our house. So we can relate to the same mental processes you are going through and share the below info we discovered along the way.

    1/ make sure you have lots of funds
    2/ make sure you have lots and lots of funds
    3/ banks don’t lend against bare property, only against a house on a property
    4/ getting a construction loan is a pain in the arse, if you can pay with savings/LOC, life is much easier.
    5/ Costs to build IN ADDITION to $60000 sunk costs for the city/municipality/permits/design etc..
    6/ with lots of concrete (basement level) = $150/ft2 (average finishings) to $200/ft2 (moderately expensive), we are at $185 approx PER BUILDING + the 5/ costs.

    So if you want to build 2 buildings on 2 lots
    a/ $60000 + 2800ft Bldg 1 x (150$-200$ = $420K-$560K) = $480K to $640K for 1 Bldg
    b/ 2 buildings you are looking at $900K to $1.2MM

    If you don’t have access to $1.3 million for construction of these 2 buildings, I wouldn’t even consider it.

    You might want to consider building 1 unit @ 640K$ and maxing floor space AND sell the other half of the lot to finance your build. Don’t know the market, but I am sure Marko or JJ could tell you. Good luck and my builder is awesome, if u want u can PM me and can provide a name, he’s won like 20 CARE awards.

  12. Before you go guessing on how much those homes cost. Check out the square footage on http://evaluebc.bcassessment.ca/

    They are only 1,700 square feet above ground, with the difference shown as basement, situated on 2,900 square foot lots.

    I think it would be a unwise to rely on these two sales as reasonable and reliable indicators of market value.

    But – you’re over 19 do what you want.

    The properties will have to be appraised for construction financing and that might just be the deal breaker. The appraisal will cost the least amount of money you’ll ever spend but might save you hundreds of thousands of dollars.

    Hate me now – love me later.

  13. I think you need to discuss this with a mortgage broker and review your current mortgage terms if you have an existing mortgage.

    A mortgage agreement will require the lender’s approval for you alter the security by subdividing and demolishing. Refinancing with a construction mortgage might mean you may need to pay a penalty to get out of the existing mortgage, plus they are harder to get than a typical mortgage.


    I’d call up Zebra and get the contact for the developers of the lots down the road. They’d know the exact costs and location-specific issues for these houses and the costs are recent enough that you’ll have much better numbers to work with and an awareness of potential issues to try to avoid. Likely know experienced lenders with other options as well.

    I guess what the numbers show is that a rough guesstimate for two 2500 square foot homes is $500,000-$625,000 for construction each plus $150,000 for tear-down and servicing.

    If your home is worth 1.1 million (total guess) as is and the total value of both new properties is 3 million you are positive 1.9 million with a brand new house – less your existing mortgage and costs of building, relocating, and renting for a year. If your current value is higher the bottom line changes.

    If your existing mortgage is $500,000 and total costs of construction are 1.4 million you’ll likely end up with a smaller mortgage on your brand new primary residence on a smaller lot (that may be worth more than your existing home) – if you sell the second lot and house and depending on how capital gains are treated.

    If you just sell the lot for $800,000 you’ll lose control over privacy/view issues, but you’ll likely end up with a brand new house on a smaller lot with a slightly similar mortgage with less risk.

    1.9 million (assuming existing mortgage) is really a lot of debt to carry for most people if you decide to keep both houses and rent one. You’ll likely be paying out at least $6000.00 a month on mortgages and taxes even after accounting for rental income. It could be worth it if the second house appreciates a lot, but that is a gamble.

    Given that you like spreadsheets I think you’ll already have accurate numbers for these options if you plug in the costs to build.

    You should get some advice on capital gains if you have not already.


  14. Janice – did you imply you have a mortgage? If you have a mortgage on the Dallas property you can probably forget about demolishing and sub-dividing without the bank’s lawyers giving you permission. Land Titles Office and the bank will probably both refuse your plans if anything is registered against title. In other words, you will likely need clear title to your property and half a million cash in the bank before you call in the demolition crew.

  15. That is a tricky price range. I would have said getting 1.4 million for those properties would have been out of the reasonable range. And I would have thought that getting 1.5 million for a new home on a full sized lot would have been the best for Dallas road. Yet two people ponied up the cabbage for a house on a half lot with minimal yards.

    This is a small segment of the market and can easily become saturated. Those small lot homes got you thinking of subdividing. I wonder how many others living along Dallas are thinking the same thing now?

    The developer took a chance knowing he dominated the marketplace for new homes along Dallas. If you wanted a new home you had to pay his price. That should bring a lot more developers thinking the same thing and trying to make lightning strike twice in the same place.

    That happened with care-a-minimums in Victoria. The first complex sold out at top prices. The next couple that tried it went bust. It was a small market segment that quickly became saturated.

  16. Then why subdivide now? Tear the current house down and build a smaller home off to the side to allow for a future subdivision 20 years from now.

    That will keep your property taxes down until you re-zone to a higher density use in 20 years.

    Any income from a second home that you may get will be inadequate relative to the higher mortgage payments anyway.

  17. Given that we plan on living in one of the houses for decades to come – and may consider retaining the other house as a revenue property – I do not think we’d be looking for a reduction in quality. Most likely something very, very similar to the 1440, 1446 and 1450 Dallas Rd. developments. We love the neighbourhood and the view, so selling and buying elsewhere would only serve to increase our mortgage – what we’re looking at is wanting to expedite the plans to rebuild and to maximize the value of the property going forward – so I’m not sure a large house on a 7400 sq. ft. lot does that – and think that things in the style of the 1440 to 1450 Dallas road likely does. I can’t see anything on that stretch of Dallas going for more than $2M as a single family home…

  18. New homes in the core get high prices but do the owner’s get burned on the re-sale? I wonder if buyers in this price range for new homes even care about what they are paying. They just want a new home.

    Paying a hundred or two hundred grand over market value is of no importance if they have decided that this is the last home they will own. Leave the selling of the property up to their estate.

  19. I don’t think lowering the quality of the construction is a good idea when it comes to properties with unobstructed water views. This is a very small market segment and the prospective purchasers are not typical buyers. They are going to be “different”, and they don’t want their home to be mainstream either. They want a home that reflects that they are different from the mainstream family.

    Even more so when it comes to new housing on waterfront properties. As they get richer they get weirder. Not that there is anything wrong with that.

  20. They are the ONLY comparable sales of small lot water view homes along Dallas Road. So you have to take a giant leap in faith and say these sales represent the entire market for water view homes and then you have to make critical financial decisions based on this very limited data. That’s close to $3,000,000 hanging on 2 or 3 sales from one developer. A very fickle market where the compass orientation of the property can swing a price a hundred grand.

    When you consider that properties with marginal homes on 6,000 square foot lots have sold around $550,000 in Fairfield West how much more is a water view lot, half that size, worth along an arterial road? Or Is it worth anymore?

    If both lots were the same size, I would guess the water view component of the land to be worth around 50% more than a property without a view. That would put a water view lot of say 6,000 square feet at around $825,000. But if you could subdivide the lot, then the site is worth more. How much more? A guess is about 50 percent more for two lots. That’s 1.3 million or about $600,000 per lot gross selling price assuming both have similar water views. Less costs to demolish, subdivide and selling commissions.

    Do you think your house is worth one to 1.1 million today? If you do – then it might be better economically to sell your home as is.

    Someone has to sit down with you and do the number crunching and you’re going to have to pay them for their time. I’d give Coast Appraisals a call and see what they have to say. You’re likely going to need the properties appraised for financing anyway.

  21. 1450 was listed at 1.395 million. Not sure what the sold price was but it seems likely that it is at or above this number. I like Zebra design fwiw. We used them to do some design work on an addition about 10 years ago.

  22. You can buy software to estimate construction costs. I don’t waste my money on them since I get the builder’s contracts sent to me when I’m doing a construction mortgages. This includes the building plans, building specifications and cost break downs.

    There are big differences between contractors as to what it costs to build the same home.

    I can see builders being reluctant to give you a set price contract. There are just too many unknowns. You’re going to have to calculate how much you can afford to pay and a “realistic” value of the properties when finished.

    It might be the case that you will net more for the property by selling as it stands today rather than as two vacant building sites or two sites with new homes on them after costs.

    You gotta do some number crunching. But first things first, talk to City Hall to see what they will permit and what the community plan is for the future.

    Hate me now – love me later.

  23. Agree – the city might not be the world’s most development friendly. That said, it is what it is, and there are certainly some economies of scale when building two houses on the same lot. Does anyone here know what the properties at 1440, 1446, and 1450 Dallas sold for – they are the closest comparator properties and likely reflect a realistic market value for each of the properties that would result from the redevelopment (similar style, similar land sizes, within a block of the subject property, etc.)?

  24. I have spreadsheets on construction. That’s the easy part. Understanding what the line by line items mean is another thing all together.

    Architect and plans
    permits, surveyor, home warranty
    service connections
    lot clearing, excavation, backfill
    footings, foundation, basement floor
    water supply and waste disposal
    exterior doors
    Stage 1 of construction for a typical build is 38.4% of the total costs

    Exterior Finish
    soffit, gutter and facia
    rough plumbing
    rough electrical
    heating and air conditioning
    drywall fireplace and chimneys
    Stage 2 of a typical build is another 29.4% of the total costs

    plumbing fixtures
    electrical fixtures
    cabinets and vanities
    interior doors
    tile work
    garage doors and openers
    decks, sidewalks and patios
    driveway, landscaping
    The last or stage 3 of construction is another 32.2% of total costs.

    And you are most likely going to have costs over what someone building in another neighborhood will have too. These additional costs may not be fully recoverable in the marketplace. For example the excavating, pouring a foundation and backfill for a typical 2,100 square foot two level home on a slab might be $30,000. But your home will likely need a lot more excavating, concrete and backfill because of soil conditions. Those extra costs may not be recoverable in the marketplace.

    There is a reason why there are so many small homes along Dallas road. The soil may not support heavier homes. That means the need for engineering the foundations and soil tests.

  25. Trying hard to not be negative but who can keep ignoring reality of a Canadian economy on the ropes while the house buyers keep getting cheered for paying $100K over.

    How Canada is becoming the orphan equity market nobody wants

    “There will be more pain for Canada,” said Sadiq Adatia, chief investment officer at Sun Life Global Investments in Toronto. His firm manages about $11.5 billion, and has been underweight Canadian investments for three years in favour of U.S. and international markets. The S&P/TSX will likely fall below 13,000 points in the near term, levels not seen in two years, he said.

    “There will be more downside here,” he said. “We’re just starting. There’s nothing on the horizon that will paint a brighter picture for Canada.”


  26. Throw in the 5 Calgary ghost towers and oil companies running low on bank credit this is going to take some more hits. How soon til the oil and gas and mining crash affects the BC budget ? Last time they had to sell huge chunks of real estate to balance the budget with the so called best economy in Canada. I smell some nasty surprises coming in the new year. Announcing more LNG deals that will never happen is not creating jobs, it’s fantasy.

  27. Absolutely agree that you need at least $600k cash in the bank before you even consider your small lot sub-division PLUS you will need clear title on your property; no mortgage, no line of credit, and no liens. If you have a mortgage or LOC, the bank probably won’t let you demolish your existing house.

  28. The fees add up extremely quickly with the City of Victoria. Let’s say you are doing a tear down and not subdividing anything…..first of all if you want sewer/storm brought to property line at maximum depth? $12,000. This fee does not include water. Is the 50′ of sidewalk in front of your home perfect? Yes, great, you still need to replace it along with new curbs around your driveway and you have to re-asphalt the road around where you did the new curbs. Just hope you aren’t on a busy street doing a duplex where they force you to do a professional traffic study.

    Building a house in Victoria is a very cash flow negative process 🙂

  29. Mon, Nov 16, 2015 8:25am:

    Nov Nov
    2015 2014
    Net Unconditional Sales: 270 465
    New Listings: 426 682
    Active Listings: 3,029 3,631

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

    Look here for updated figures each Monday morning.

  30. Wow…50k to subdivide? I guess I did pretty good with my subdivision. It cost under 5k…
    If spread sheets are your thing you can price out a custom build based on your desired quality level. I have put numbers together for a custom build of high quality with a GC. House around 2900 sq with a suite and I came up with $450k not including a complicated demo or the land cost. This only had 5k for design drawings and no contingency or renting costs. This was also based on ICF as the core stucture with really nice windows…. Lower your quality, be more standard and be your own GC and save money. Otherwise I would not begin to build unless you had at least 600k to burn…

  31. I haven’t bothered to add up all the receipts on my owner-build project as I don’t care how much I spent but I am guessing probably around $115 to $130 per square foot; however, I had a ton of factors on my side.

    1/ Most importantly, my house is not in the municipality of Victoria.
    2/ No teardown and all services (sewer, water, storm, gas, underground power, telecom, etc. at lot line and pre-paid connection fees which is a little unique for 1/2+ acre lots).
    2/ I designed a home that fit/worked with the land so the excavation cost me less than $10,000. Could have easily been 50k+ in earth work if I designed something that required blasting.
    3/ At over 5,000 sq/ft so the cost is spread out and the per square foot price drops.
    4/ I start construction in the summer of 2014 and 90% of the home was done before we started seeing major upward pressure on construction costs this spring/summer.
    5/ I am pretty savvy I like to think, just various random stuff….for example, for my suite kitchen I purchased a $15,000+ showroom kitchen (cabinets, quartz, sink, faucet, etc., etc.) from the Duet condo development in James Bay for $1,000. I just called up developers I knew where closing showrooms in the near future because their projects were finishing up. There is probably another 100k in various “savvy” savings we will call it.

    I have a video series on YouTube talking about various owner-builder experiences, I’ll be finishing it up soon with 3-4 more new videos -> https://www.youtube.com/watch?v=6DXzc6HM2RA

    Can’t seeing being able to build in the City of Victoria anymore under $200 per foot.

  32. The home at 147 Olive had a number of offers shortly after being listed. I’ve been saying for years on the blog that newer homes in the core would perform well due to an in-balance between supply and demand. The City of Victoria makes building a home such a painful, complicated and expensive process (you really don’t know until you do it) that supply remains very low. The lowest price home in the City of Victoria on a half decent lot (5,000 sq/ft+) right now is 1.46 million. The homes that are 880k to 1,000k are on https://www.youtube.com/watch?v=6DXzc6HM2RA

    Can’t seeing being able to build in the City of Victoria anymore under $200 per foot.

  33. After a number of faintily desperation-tinged open houses Bushby is now down to 879 having started somewhere stratospheric. It’s probably not a good benchmark for what you are proposing as it has a number of handicaps which are quit glaring if you actually visit.

  34. Running the numbers is easy – spreadsheets are what I do. It is more a case of giving up on the initial plan that would have seen a much larger SFH built on the existing lot – but is likely less financially wise than building two houses (on smaller lots). Some of it is that the existing house is coming to a point where some significant money might have to be spent to extend its lifespan even another 5 years and the space simply is not meeting the needs of our family (too much yard work, not enough floor space, kids are sharing a room, its cold in the winter, the closets suck, the bathrooms also leave much to desire etc. etc. – so there’s stress of delaying the build)… The plan would be to move out and rent for the year while the house was going to be built. The houses on either side of our house have been are duplexes (actually one is a duplex, and the other a four plex), and less than a block down the road is the redevelopment that saw 4 houses be put on 3 lots (including 25 Bushby which is now asking $895,000).

  35. Dallas road water view is going to command a very high lot price. I’d do some detailed spreadsheets to come up with the best option re. multi-family or subdivide and build two or sell one lot. If it is overwhelming it might make sense to pay someone experienced with local residential development like Marko (doesn’t have to be him but he would likely be good or know someone to recommend) to sit down with you and run the numbers. Don’t forget to evaluate the stress impact of the project as well.

  36. Here are some houses for you to look at..

    147 Olive Street had a residual value attributable to the home at $313 per square foot.

    1550 Earle had a residual cost of $190

    1187 Oxford had a residual at $323

    1461 Hamley’s residual was $211 per square foot

    NOTE: As the size of the home increases the price per square foot rate decreases. Smaller homes cost more per square foot than bigger homes of the same quality of construction.

    And it is a sad comment to make but once the builder hears the address is on Dallas road you can forget $200 a square foot. I would also guess that any home will have to be on an engineered floating slab foundation along Dallas Road. No crawl space or foundations unless you want an indoor pool.

    Take a look at the homes at:
    1450 and 1446 Dallas Road built by RM2 Development and you’re now into $300 a square foot and more.

  37. You’ll need to know what your zoning will allow. If you can subdivide that’s great, otherwise you may have to apply to re-zone to a higher density. And that’s not so good. Check out the City’s online zoning bylaws for your property.

    You’ll have to know your soil conditions. If you’re on clay loam that’s good if you’re on silt – sell.

    Have there been any new homes built within a block or so of your home? If yes that’s good. If no – ??? Why not. Drive around your hood and get the names of the builders that are active in your area, then call the Better Business Bureau to see what kind of complaints they may have had.

    Building costs are all over the place. There is no standard cost that builder’s quote. They are just like everyone else they want the highest price they can get.

    Plan on renting for a year during the build and hope for 6 months.

    Much better to figure out what you can afford. If you have an idea of what the property would be worth as though finished then subtract what you owe. Divide that by the square footage and you have a start. You don’t want to pay this amount unless you so truly love your neighborhood that emotions are more important than money.

    Get three quotes. The builder with the most detailed cost break down analysis is generally better than the one written on the back of a pack of smokes.

    If you go for the lowest bid, expect the builder to come back with revisions during construction, cost over runs and not meeting deadlines. Have your lawyer on speed dial.

  38. The lot is water view (on Dallas) – and it would be two smaller lots (one 2800 sqft, one 4400 sqft) -it would require tearing down the existing house to rebuild. I’ve heard the $200 per square foot number before.

  39. You’re right Totoro, but only if you keep the wind in your sails throughout the entire process. A 3000 sq ft house construction very rapidly becomes a $300 per sq ft build when all costs are considered, including landscaping and all the finishing touches. That means $900,000 for all building costs of a “dream home” plus $650,000 for the lot and suddenly the total cost is over $1.5M.

    The owner/builder of Olive has lots of experience, so he probably did ok at keeping his 3000 sq ft plus 400 sq ft cottage at the $250 mark. At that rate, he broke even.

  40. I don’t know. 147 Olive Street just sold unconditionally for 1.42 million. It had been purchased for $525,000 or less of couple of years prior, torn down and one new place built. Even if it was $125,000 to tear down/get approval and $250/square foot to build that is still a profit of $205,000 for one home. And the tear-down on a sub-dividable lot is a one-time cost for two residences. Depending on when you bought and where you are located it could be a profitable move than gets you a dream house – but I agree building your own place is generally more expensive than buying and remodeling – and there is a lot to manage.

  41. Janice, it depends on many factors, including the demolition costs of the existing building which can be as high as $100,000 if you have asbestos and lead paint and you likely have both. If you have vermiculite insulation in the attic or walls then the pre-demolition testing and remediation will be sky-high. So budget $50,000 per lot ($100k total).

    After that’s done you, it’s time to subdivide. Add small-lot subdivision costs and survey costs. Budget another $50,000 for these items ($25k per lot)

    Now you have two cleared lots.

    Now get the city to add all services to each lot; water, sewer, storm drains, and sidewalk and boulevard remediation. Budget $30,000++per lot.

    Each lot now has over $100,000 in costs before you begin construction. Standard 5000 sq ft lots in southeast Fairfield sell for $550,000+ and lots in southwest Fairfield near the water and Beacon Hill Park and Cook Street Village sell for $650,000+. Small lots sell for less.

    Three houses were built in southwest Fairfield in the past year, two on Faithful and one on Cambridge. In all cases they were custom-built for the owners at a cost that would prevent a spec-developer from making a profit. The average cost is about $250+ per sq ft and that makes the property value between $1.1 million and $1.4 million.

    It’s risky for homeowners to become building contractors. There are lots of surprise costs and if you don’t have access to all the trades, then you’re in for a few surprises when you try lining up the crews.

    Oh, did I mention builder’s liens in your nice new property? Ask you lawyer about them.

  42. If you have a double lot in Fairfield, that is sub-dividable per the bylaws you might want to consider selling one of the lots and using the proceeds to build a home on the other one. I don’t know the costs of tear down but $200/square foot is what we’ve been told for building in Victoria. Someone else might have a better idea. Marko has built recently.

  43. But has anyone done the math? Is there any reason why we cannot live indefinitely in a world of endless credit.

    We’re on the verge of a depression. We don’t make anything anymore, other than sawn lumber, a few video games and other piffling bits of more or less useless high-tech.

    So what’s to stop the endless expansion of credit? Maybe the BoC just needs to print, print and print, and Justin is just the man to do it, if pére Pierre’s record of record deficits is anything to go by.

  44. Perhaps some bankers can`t quite see how you can run an economy for ever on an ever expanding money supply and debt load, in which case they might start raising rates to: (a) improve their margins while the going remains good; (b) eliminate some of the worst risks, i.e., people who can only afford to borrow at less than the inflation rate, which is to say people who can only borrow if you pay them to.

  45. Figured those here might be in the know – I’m trying to run some numbers as it looks like the roof might be failing and we’ve had basement water problems. The plan was to tear down and rebuild our dream home in 5 years – keeping the lot as is. But it is hard not to look down the street and see what some of the small lot subdivisions are fetching or even some of the duplexes in Fairfield and think that maybe the better plan is to either subdivide and build two houses or build a duplex now, sell 1 of the houses or a side of the duplex and live in the other. I am thinking we might even be able to reduce our total mortgage by doing so. Further, we mitigate our exposure to a market correction by selling a portion of our position in it. But – I need to know what the current cost per square foot of building is currently running in order to do some analysis…I’ve got a pretty good idea about what a new house even on a small lot (~2800sq ft) might fetch….

    Greatly appreciated.

  46. All I know is the facts Leo that Canadian mortgage rates inched up last week and that’s a first in a long time. Is it a new trend ? I have no idea, but since it’s the first in a long time it’s a very important occurrence in this recent panic buying in Victoria. Call it negative all you want but if it’s actually happening then how is that negative ? It’s reality.

    Mortgage rates are influenced by the bond market not the BOC. If the bond markets see Canada as a risk considering money is fleeing Canada at record levels then it’s possible mortgage rates go up. Think the banks are going to eat the difference ? I wouldn’t think so.

  47. Hawk, face it, you might be wrong and your daily negative spin might be wishful thinking. Did you sell too early like Info and maybe you are now hoping for a crash so you can buy back into the market?

    The news you are conveniently not repeating in your blog posts is that the Bank of Canada is investigating negative interest rates for Canada. The only people who think interest rates should go higher are banks and life insurance companies and pension funds.

    Speaking at the University of Toronto tecently, senior deputy governor of the Bank of Canada Carolyn Wilkins said the bank must be innovative with its existing monetary tools.
    Wilkins says if the Bank of Canada continues to focus on a target of two per cent annual inflation, then there’s a greater chance than in the past that policy interest rates will tumble to zero.

  48. I cannot see any reason to raise rates.

    The Germans are at zero, the Brits are talking of negative rates, and America has a real unemployment rate probably over 15 or 20%, with almost 100 million working age adults out of the workforce (and the expectation is that half the jobs that remain will be wiped out by automation within the next few years). Meantime, Alberta’s gone broke, there ain’t gonna be any new pipelines, and the price of oil continues downward. Spending borrowed money is all that’s preventing outright depression. But so long as yous all just borrows yer brains out and keep spending, everything will turn out good.

  49. These two types of properties require a specialized skill set to accurately and reliably estimate an anticipated sale price. Computer programs used by BC Assessment or risk assessment tools used by CMHC and some lenders are not always reliable for these one-of-a-kind type properties.

    Most agents will rely on the owner to set the asking price (vendor pricing) for these types of properties and then reduce the asking price over the many months that it will take to sell the property. Eventually the asking price falls into a reasonable range and the agent gets some action on the listing.

    The asking price may be irrelevant at this point. The important part is get the property advertised and have the market determine the purchase price. There is always the chance that properties like these will sell over market value if the prospective purchaser is unfamiliar with local property values. In that case it may be a good idea to market the property at substantially over market value to capture that specific buyer.

    We tend to forget that the listing is only an advertisement to attract buyers. As an advertisement the listing just has to be not misleading. That doesn’t mean the listing has to be absolutely accurate in its physical description and most certainly not in the asking price.

    All listings have a disclaimer as to the information presented and that buyers must satisfy themselves to the reliability of that information. That verification could be a written appraisal report to estimate the property’s value before the purchaser makes an offer.

  50. I do agree with the James Altucher article that a principal residence is not an investment. Buy something you can comfortably afford and enjoy it. Of course, within reason. I don’t advocate paying 800k for a 700k home because you can comfortably afford it.

  51. Interesting. Nottingham isn’t worthy of that kind of price tag, not a secluded street. Probably calling up the HAM hotlines as we speak. Would be surprised to see a quick sale.

  52. If zero rates ever happened there will be major employment problems and more that will prevent prices from rising much higher. Commodoties are falling off the cliff which will eventially effect BC. Mortgage rates are different then BOC rates. Bond markets in US determine mortgage rates which are already starting to edge up in preparation for December US rate hike. Justin’s game plan should be to do all to prevent a crash not promote higher home ownership. Money lenders tightening up should take care of that if more hikes happen into early next year as speculated if US economic numbers stay positive.

  53. He says:

    “Let’s say you want to buy a $500,000 house at a 6% mortgage.
    You put $200,000 down.”

    Thing is, though, you can get a 2% mortgage. What’s more they’re talking about negative interest rates, which means the person you hope soon to sell to might have a 1% mortgage or 0.1%, and in which case you can expect to make a killing in a just coupla years. That’s what’s keeping the market upward mobile.

  54. This is interesting:

    2990 Rutland Rd.

    Listed at $2,500,000.00

    Assessed value: $1,267,000.00

    And here’s another interesting disparity:

    2510 Nottingham Rd:

    Listed at $4,480,000.00

    Assessed value: $2,890,000.00

    So have prices just doubled? Is the BC Assessment Agency out to lunch? Or is there some segmentation of the market occurring: people who earn a living here mostly struggling to buy the average priced house, while HAM bids up the price of the better class of property? Or something else?

  55. Squamish sells out but Victoria has lots of condos for sale. Hmmmm…. now we know the party is really over. Wonder if they bought with a click of a mouse or stood in line for days in the torrents of rain ? 🙂

  56. That quote was mine that the party is over ,not his. His predictions that mortgage rates are going up are now a fact from mortgage broker sources.

    It’s a monumental moment for mortgage rates to finally rise. Many other economists and financial people think the same but no one expected the economies to need free money and almost zero interest rates for so long that has only created asset bubbles.

    I don’t think Garth’s site has been going for 15 years. Didn’t someome say you are banned from his site ?

  57. For most home owners a rise in rates will only be felt at mortgage renewal time with higher monthly payments. More immediately, new construction and industries associated with housing will have a reduction in sales and an increase in unemployment. That will lead to an increase in housing inventory

    (the following is just an opinion, don’t read more into it than the cost of the paper it is written on. There is no evidence that this is happening or will happen. This is not something to piss your pants over.)

    How will this shift in supply, demand and price be interpreted by the marketplace?

    Would people now consider this the start of the long awaited market correction?

    When you read the comment sections of the media articles there has been a shift from being pro real estate to one where a market correction is now a given. It’s going to happen it is just a matter of when in most commentators’ minds.

    There is a physical aspect to a home’s value. Brick, mortar and dirt. But there is also the psychological aspect of questioning how wise investing an enormous amount of money into one single asset was. As prices decline that will only reinforce and become the proof to show the end of the real estate cycle of high prices.

    If that were to happen there is no one who can tell you how low prices will go and for how long prices will stay low. Don’t expect investors to return to the market as they have lost equity too. And banks will be reluctant to lend money to those highly leveraged in real estate in a downturn. Estate agents and builders may be the golden boys to bankers today, in a downturn they will be treated as lepers of old. Price to rent, price to income and other ratios spouted by media real estate Gurus will become even more meaningless than they are today.

    And It will be substantially cheaper to buy than to rent as buyers are reluctant to purchase and banks are reluctant to lend. A single parent with a moderate government salary may once again be able to buy a starter house in a starter neighborhood and be able to pay the home off in 15 years.

    Foreign investment for wealth preservation and money laundering will drop dramatically. They may be crooks and criminals but they aren’t stupid to invest in a falling market.


  58. If we look at Garth’s record of essential being 100% wrong over the last 15 years then statistically one could come to a conclusion that if he claims the party is over really it is just starting.

    Just YouTube “Garth Turner,” and watch some of the videos from 2009 where he predicts in interviews interest rates will be 5,6,7% in 5 years.

    How did that pan out?

  59. Saw this on Garth Turner’s blog tonite. Looks like the party is over, rates are heading up.

    “No bank rates have yet risen in Canada, yet already mortgage brokers are starting to post higher mortgage costs. Five-year fixed loan costs edged higher Friday, now in the 2.5% to 2.7% range, with pre-approvals closer to 2.8%. Meanwhile the discount between fixed and variable shrank, with adjustable-rate mortgages currently around prime minus a half.”

  60. A word of warning. The guy who created the “smith maneuver”, passed away just after the 08 crash. I always suspected it was due to the stress of people calling wondering how they needed to come up with a chunk of money to exit this investment that was setup. Leveraged investing sounds great on paper but in the real world it rarely seems to work.

  61. Interestingly, if you stayed away from downtown condos, the median price for a 955 square foot two-bedroom home is $275,000. The typical condo will be circa 1990.

    To me, condos are more reflective of income and affordability than are detached houses. And that’s why I would expect there would not be a substantial difference in price between the two areas. The big trade-off between the two areas being age and condition over ease of accessibility to downtown Victoria.

    In contrast to both of these areas is the downtown core. Being within a half kilometer of City Hall. The median price skyrockets to $327,000 and you get about a hundred square feet less for your money which is mostly offset by a newer condo with half of those selling less than 8 years old. Still about 70 percent of the buyers indicated they were from Victoria.

    That difference between these two areas is important for condo developers to understand. There is a sweet spot for condo construction in Victoria. Be one block out of that sweet spot and the development will not get the high downtown prices.

  62. There are some 102 condos for sale in Langford and Colwood. All of them built in the last decade. Asking prices ranging from a low of $174,000 for a small one-bedroom along Goldstream to a high of $539,000 for a larger than typical luxury two-bedroom on Bear Mountain.

    Last month there were 18 condos sales in Langford and Colwood ranging from $215,000 for a two-bedroom along Goldstream to a high of $799,000 for an outstanding 2,131 square foot penthouse on Bear Mountain.

    That’s about 5.5 months of inventory with new listings being added at a rate of 1.6 to every one that sells and half the condos selling in under 60 days. These ratios indicate a balanced market with stable prices.

    The typical condominium being a 900 square foot two-bedroom home selling around $255,000 or about 105 percent of its 2014 assessed value.

    A balanced market that is good for sellers and good for buyers and I would guess a more enjoyable buying experience for most purchasers not having to deal with hard sell tactics.

    At least 72% of the buyers over the last six months indicated they were from Victoria.

  63. Mon, Nov 9, 2015 8:25am:

    Nov Nov
    2015 2014
    Net Unconditional Sales: 145 465
    New Listings: 238 682
    Active Listings: 3,060 3,631

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

  64. I was reading that PayPal has an algorithm program set up for small transactions as well as large to look for patterns of money laundering. If they are made aware CIBC or any other bank is facilitating these deals they may begin to stem the flow.

  65. Missed this one the other day. Not good to see a Canadian bank get downgraded, hasn’t happened in decades. Meanwhile money is leaving Canada like no other time.

    Moody’s cites growing consumer debt risk, puts Scotiabank under review for ratings downgrade

    “Moody’s Investors Service has put Bank of Nova Scotia’s long-term debt ratings under review for possible downgrade within the next 90 days. The ratings agency says the bank has taken a greater plunge into consumer debt in search of bigger profits, which raises the prospect of future credit losses.”


  66. So positive to see another investigative story on how our oh so “conservative lending” banks are facilitating the breaking of laws in order to profit. It’s so un-Canadian to keep these poor persecuted people out of our country while they flip houses to all their money laundering friends. Meanwhile we get scrutinized for mortgages with demands for letters from employers while they claim “student” and “housewife” with zero income. The Canadian banking system is a complete joke.

    Canadian banks help Chinese flout their laws to get piece of ‘smurfing’ billions

    “A record US$194 billion exited China in September, according to a Bloomberg gauge estimating capital flows. The Chinese use numerous tactics to transfer money abroad, and smurfing is routine, with some of the cash flowing into overheated property markets in Vancouver, Hong Kong, New York and Sydney.”


  67. A hundred grand is just $380 more a month. Would you let $380 stop you from buying the house you want in the location you want? Especially after you have been outbid half a dozen times already. And you’ve decided this is the last home you’ll ever own. Does it matter how much the home costs if you are never going to sell. What matters is that you get what you want. After all don’t you deserve this home more than someone else? Are you going to let someone else live in your dream home? If you don’t buy this house right now you’ll regret that decision the rest of your life because in 20, 30 years from now what you overpaid will mean nothing.

    You trying to give rationality to someone who’s irrational. All you need is a little push to get that signature on paper.

    If the interest rate was 5 or 8 percent you might not go for paying a hundred grand more. But at 2 or 3 percent it’s nothing.


  68. You just need a plausible reason for the move. A plausible reason that is acceptable is that you didn’t get along with the neighbor. But if you use that same reason three times in a row, you might not be exempted.

    Another one is that you moved to be closer to work. Or if you’re with the government to be farther from work.

    Some vocations are more scrutinized than others. Say if you’re a builder or a real estate agent.

    It really is a simple answer. If you’re doing this knowingly. so will the government know. People generally are not that good at lying to someone in an authority position.

  69. I agree that buyers can fall in love with a home but I disagree that “overpaying” by $100,000 is something that occurs with any frequency, although Marko probably is better at responding to this..

    We are not talking about tvs and cars here – of which there are potentially limitless supply and which are relatively small ticket items.

    We also are talking almost a million dollars. In a buyers market it might be worth $100,000 less. In a sellers market, $100,000 more. The $100,000 over is not, imo, buyers blindly offering over market. Price your home too high for the market and you can expect to receive no offers.

    And your theory doesn’t explain why someone would sell for $100,000 “under market” in 2013. My experience is that the only time there is a significant price drop is if the price was too high for the market to start with. Some sellers can get into trouble by overpricing at the outset and having the house on the market too long in a buyer’s market.

    And you can always check market through stats. Review comparables. The blue book for cars along with reviewing ads online. Easy to determine and for such a big purchase a very significant issue for every single person I know who has bought a home.

  70. Not really, the site could have been visited by the assessor any time during the year up until October 31st when the roll is closed. The site could have been looked at to determine the percentage complete in January. Each residential assessor has some 20,000 properties that they have to review for errors each year. They don’t go out to every property every year. Most of the calculations and estimates are done by a computer program. Some are done by hand but they will be the odd ball ones that fall outside of the parameters of the program and the ones that are under appeal.

    You don’t think that there is some overworked and underpaid government assessor sweating over your personal home’s assessment with a pad and pencil? They work with spreadsheets, software and mass appraisal analysis.

    As I have said before. The assessments are for tax purposes only. If you want to use them for anything else then that’s your poor judgement not theirs.

  71. What is a bit odd about the application for rezoning was that it was made specifically on the grounds that their disabled mother was going to move in to the garden suite long-term. Some neighbours supported the rezoning on these grounds, and then the house was sold. It may be just a change in circumstances, but pretty sure the neighbours weren’t best pleased.

    As for CRA, two build and sells in two years could be an issue IF the exemption was claimed. This might be a business or there might be a legitimate reason to sell related to a change in circumstances.

    It appears that, in the case of the sale of principal residences, the courts and CRA look most closely at your intention at the time you purchased the properties and the frequency or number of times you’ve completed similar transactions.


  72. If the house had sold for $2,000,000 would all similar houses be worth $2,000,000 now? Or did one person just pay too much?

    Just because one person overpays doesn’t make a new market value.for all similar properties.

    As I said, one sale doesn’t make a market.

    If your life partner paid $30,000 for a typical 1982 Ford Pinto. Would you say that was market value? Or would you say your life partner paid too much?

    If you bought a smart TV on Used Victoria for $500 and then found the identical ones listed at Wallmart for $299 would you say you paid market value or you paid too much?

    That’s what makes real estate special. Seemingly intelligent people make rational decision on everything in life until it’s real estate. Call it real estate and they lose all rationality in making decisions. They only believe what they want to hear. And if they eventually come to the realization that they paid too much, then they will blame it on the real estate agent. It was the agent who mislead them because they can not accept that they could be that stupid.

  73. The owner/builder of 147 Olive is probably being monitored by Revenue Canada after two builds and two sales in two years. His last build was a modern box on Pembroke near Victor. He flipped the last one after one year and the one before that was a similar situation.

    How many owner/builder/flips before CRA visits you with an invoice?

  74. I thought this house looked familiar, but then thought I was mistaken because of the price. Traditionally the houses right on Henderson have been significantly cheaper than the surrounding quieter streets. However, if someone is just buying it to rent out, they might not care about the traffic. On the other hand, I can’t see someone paying that much for a newly-renovated house just to rent it out. So, who will the buyer be?

  75. At this point you could only say that either the Cadboro Heights property undersold in August 2013 at $982,000 or oversold today at $1,181,000.

    This one sale alone would not prove that the market for similar properties has increased by 20 percent. One sale does not make a market.

  76. If the market in the core is currently approx. 10% up from 2013 then this means the Cadboro Heights house beat the market by approx. 10%. I’d say that different locations and styles of homes appreciate at different rates in a seller’s market with little inventory.

  77. Don’t forget that there are also sub penthouses too. Now we have “junior two-bedrooms”.

    Can you imagine what the size of a “junior two-bedroom” must be?

    Years ago a developer told me that buyers don’t understand square footage, they only understand one or two-bedrooms. That’s why he built his condo complex with two-bedrooms that were only the size of a typical one bedroom.

    He went bankrupt and left the city. And the complex went into receivership.

  78. I remember when a penthouse meant you were the only tenant on the top floor with a 360 view. Now you can have 8 condos and it’s still called a penthouse. I guess since I’m on the top floor of my place that I live in a penthouse too, along with all my neighbors….. and with a better view than all of Abstract’s last 3 places for $1300 a month. Oh the joys of saving a million.

    “Unit prices will start in the mid-$200,000’s for junior one bedroom homes and are expected to rise into the seven figures for the project’s eight penthouses.”

  79. I’m convinced as long as you can afford it and buy the right place right location and have a long window. By the time most people could afford a fancy expensive home their kids will likely be grown and they won’t be up for the upkeep..

    And it is not if you never sell. It is if you don’t have to sell in a downturn. You’ll want to plant to sell in an upswing as your leveraged appreciation will have a very high tax free ROI.

  80. What I do know is that PowerPoint showing the photos of the completed home and garage would have been required to be submitted to the PLUC at least six weeks in advance of the Council meeting approving the re-zoning, if not more. This means the home would have been in that state as of May 1, 2014.

    Given that BC Assessment doesn’t just use site visits but also reviews permits, aerial views and zoning, it would appear likely that they underestimated the value or the market is just mad for this type of new “luxury” new construction with a standalone garden suite in Fairfield.

  81. 3524 Henderson Rd will be an interesting one to watch

    Sold for $520,000 in early 2014, renovated, and re-sold for $765,000 March 2015, re-listed today for $839,000.

  82. Thanks Jack, much appreciated. Talk about deception but what’s new in this industry’s game of greed and misleading the numbers.

  83. If mortgage rates were to go up, I would expect to see affordability drop off significantly. With 65 to 75 percent of our market being local that should make Victoria a City of half million dollar homes that few people can sell.

  84. The developers don’t seem to be getting prepared for this wave of boomers. They’re switching from building condos to rental buildings.

    From the top floors of the new Bosa building you’ll be able to see View Towers.

  85. I’m interested in real estate trends all around the country, not just the one I operate in. Our market isn’t as volatile as others which can make it a better proposition to actually sell in down markets because you make up the difference, and then some, when you buy in another location where the prices might be even more depressed, particularly retirement destinations.

  86. Are you trying to convince me or yourself?

    Essentially what you’re saying is that real estate is a good investment if you never sell. Is that a realistic statement to make?

    Fancy homes and good neighborhoods are affect by economics just as any other type of house or hood.

  87. What you don’t know is the day the assessor saw the property. It’s valued as at July 1 but that doesn’t mean the site was looked at on July 1. There are 1.9 million properties in the province of BC. It is not possible for all of them to be seen on one day of the year.

  88. Although as far as we can look back this has always been the case for fancy homes in desirable core areas of Victoria if you could wait a market downturn out. They are a good place to invest if you can afford to get in and stay in.

  89. What are you talking about?

    The assessed value in 2013 for the building was only $129,000, it was torn down that summer. Value of the buildings had risen to $345,000 by July 2014 when it was fully built, including the free-standing garage.

    The new home and garage were completed by June 2014. The garage was rezoned to be a garden suite on June 26, 2014 by the City and this is the only part of the $480,000 over assessed that would potentially not have been counted as of July 2014 assessment.


  90. Yea Cadboro Heights purchase is an awesome move looking back. Buy a new house in a nice area, enjoy Cadboro Bay village and the beach for a couple of years and then pocket approximately $150,000 after expenses tax free after you are done.

    Certainly better than renting some 1970s outdated box for $2,500 around UVIC for a couple of years.

    Of course, this is all looking back now.

  91. A little more care on comparing new construction with the assessed value. The assessment would be as at July 1 the year before. The home may have only been partially built at that time. The assessed value would then only be for a partially completed home.

  92. The sale/contract prices of new condominiums from the developer may or may not be a market price.

    Here’s an example. A condo listed at $449,900 has an accepted offer of $449,900 not including GST of $22,425. The buyer pays the GST to the government. A government rebate does not apply because of the price paid and that this is to be used as a secondary residence built after April 1, 2013

    Then the developer rebates the buyer $22,425 and an additional $2,000. That developer’s rebate is non transferable if the buyer decides to assign the offer to purchase to another party.

    The contract sale is thus recorded as it is written in the contract as a full price offer excluding GST.

    Why such a convoluted contract of purchase? Why not just subtract the $24,425 from the asking price and have the buyer send off the GST?

    Because lenders finance on the price less any rebates and the developer wants to show that all of the suites are selling at full price. In this way the buyer does not pay more than $449,900 and gets a conventional mortgage of $347,900. Everybody gets their money and the bank gets a mortgage.

    The only thing that is inaccurate is how the contract price is recorded by 5%. Now that full contract price and others like it provide the basis for setting a value in re-financing mortgages. An automated valuation computer model would then over value other properties that are to be financed using this sale as a basis for any value estimate.

    There is nothing illegal or wrong about this contract. The fault is in how computer models and human appraisers use that information. Both rely on a small judgement sample to estimate market value and assume contract price to be equivalent to market price.

    Any analysis solely on new construction would be suspect unless every contract to purchase was read thoroughly for rebates and other sales concessions. And that ain’t gonna happen in this world where speed is more desirable than accuracy.

    And that also applies to absorption rates for new condos. When a new complex sells out in 1 day what does that say about the absorption rate? The answer is you really don’t know unless you audit every contract to purchase for the date it was signed and how many units were bought by one individual or entity. You might have 5 units bought by a real estate company six months ago that gave the company exclusive listing rights to the complex. In this case the days on market would be recorded as zero or one.

    So in answer to your question Hawk. I can’t tell you the absorption rate on new condos. But I can on re-sale condos.

  93. Yikes. Olive went at $480,000 over BC Assessment valuation – Cadboro Heights at $201,000 over. Can see why people buy fancy big houses. That is a lot of capital gains exempt cash to pocket in a short period of time.

  94. The newer single family home market is seeing some large gains. 147 Olive Street (1 year old home) goes in a bidding war unconditionally for $1.42 million and then 2487 Cadboro Heights (two years old) goes this morning for $1,181,000 at 21 days on market. It was purchased brand new in 2013 for $982,000 including the GST. At that time it was a combined 190 days on market.

  95. If mortgage rates start going up here next year that’s when prices will really start to lift off for a couple years… unless it’s different this time 😉

  96. Looks hot for BC… 23,300 jobs in Oct or 1.0% m/o/m increase (ON only 0.4% increase).

    Amazing how the island will soon have more non-working than working as that TC article explains^. I could see a wave of wage pressures about to hit our shores.

    “So you’d like me to build you a new deck for your morning tea sir? …I think 30 grand should cover it.”

  97. Agreed totoro, A million bucks for a condo with zero view of anything other than maybe the hospital is insanity. Another sign the price ceiling has been hit when bozos waste good money on an over priced box on a busy corner. But then again Mike says it will be worth $2 million in a few years guaranteed. 😉

  98. Not to forget the US jobs numbers blew the doors off. Bond market taking a big hit. Mortgage rates definitely going up now here too unless US stock market crashes between now and December.

  99. Victoria unemployment rate up to 6.1 from 5.6 heading into winter. Mostly part time jobs created across Canada and most full times were government not private sector. A change in the wind.

    “Most of the job gains in October were part-time (up 35,400) while full-time jobs grew much more slowly (up 9,000).”

    “But some of those job gains may have been temporary, the result of federal government hiring for the election. Of the jobs created, 32,000 were in public administration, StatsCan said.”


  100. Sorry Marko, I don’t know how “they” became “we”…must’ve been tired. I didn’t have anything to do with it, but it was probably assigned like you said.

  101. Hard to believe a condo can be 1.2 million for 1338 square feet at the corner of Richmond and Oak Bay. Be interesting to see what happens between Richmond and Foul Bay in the next number of years as the area is clearly changing and densifying. Red Barn Market should be opening… spring?

  102. Well, we sold the same top corner unit at foul bay for 963k back in June (~150ft smaller) busier intersection

  103. Lots of those around already. Banks are laying off people as well and there are only so many cardio wards and they dont pay enough which is why no one can find a family doctor.

    The jobs stats in BC last month showed the real estate and financial jobs declined bigtime. They should be increasing not going down in a true economic upswing.

  104. Looks like another Bear Mountain disaster in the waiting just like the other Abstract at Foul Bay. Highly congested corner with high CO exposure. Does it come with a free gas mask ?

  105. I was thinking more along the lines of financial planners, pharmacists, cardiologists, culinary chefs, accountants, wealth managers & insurance brokers, cosmetic surgeons…

  106. Thanks for the info Marko. Looking at the VREB charts and benchmarks there doesn’t seem to have been a whole lot of money made on condos in the past 5 years. I am sure there are exceptions but the prices are similar within $10K to 20K max. Not nearly the appreciation of a SFH of course but I think condos have hit the ceiling limit now on what people will pay for Victoria.

  107. You mean all those minimum wage service worker jobs ? That will qualify you for a mortgage alright. Hate to break to you but there is no wage pressure with deflation. Telus just laid off 1500 so they can pay the shareholders their dividend.

  108. There isn’t a lot on the horizon in the core in terms of condos as a lot of developers have recently scrapped condos in favour of apartments such as Chards huge development on Yates (apartment building already sold to a pension fund).

    The Escher, Legato, and Encore are all selling well and beyond that there isn’t too much. Even with those three Escher is more than a year out, Legato is two years out, Encore is three years out.

    Janion is under construction but 98% sold out.

    Belcher condo sold two units last week so they are now up to 6 out of 9 sold. With the market appreciating and super low interest rates (for the developer carrying the units) you won’t find many developers in a huge hurry to offload inventory.

  109. That’s one of the main reasons why prices should rise rapidly here for 10+ years. The shear increase in retirees and number of workers (and wage pressure) that will be required to service them.

    From the TC article above:
    “The overall trends suggest most migration to the region as a whole is by people over 55…The numbers just confirm the blindingly obvious: People retire to Vancouver Island… Even when many of the people moving to a region are not working and are supported by pensions or other sources of non-employment income, the increase in the demand for services and housing will tend to create job opportunities.”

  110. Jack , do you have any access to stats on absorption rates of new condos ? Seems for all the building increase there is a lot of them for sale or will be down the road. One smaller new condo building on Belcher was only 45% sold out it said a week sgo. With only 9 condos total that meant to me 5 were still for sale post construction which struck me odd. You would have thought they would all be sold out pre-construction in such a prime area and the small number available. Maybe a sign of a saturation point.

  111. I don’t think that will be an issue this time around as rates were up in the teens or near it back then. We are at damn near zero % with nowhere else to go. Wage growth is near zip as well, where in those cherry picked years everyone was getting a huge raise annually.

    I sold into to two peaks, one where I had to buy again, and it worked out better to wait til the spring. Prices dropped 10% or more each time but the price on the new place dropped too.

    All the cheapskate retirees are moving to the island now to hoard their pennies, no one else wants to work so I don’t see this panic buying mode lasting much longer. The market can turn faster than Mike can create another alias. 😉

    Les Leyne: Almost half of Islanders aren’t working

    “It’s the employment rate on the Island, which Statistics Canada puts at 54 per cent. That’s the lowest employment rate of any of the seven major regions in B.C.”


  112. People waited in 2001, 1987, and 1973 for the “boom in listings” to return too. The problem with that gamble is they’re often the ones who ended up finally buying in end of 2009, 1995 and 1981 once prices doubled or tripled. I’m not at all presuming the same thing happens again, but I think it’s at least worth some thought on this board.

  113. Sooke has a population of around 11,500 and some 5,000 dwellings of all types.

    There are also 230 homes listed for sale.

    That’s a ratio of 1 listing per 50 people or 4.6 percent of the total stock of housing is listed for sale.

    Sidney has a population of some 11,200 and about 2,200 dwellings. With 92 current listings. 1:122 and some 4.2% of the total stock.

    Oak Bay has a population of 18,000 and about 8,200 dwellings. Current listings are 61
    1:295 and 0.7 percent

    Victoria with some 80,000 people and 47,700 dwellings has 339 listings.
    1: 236 or 0.7 percent of the total stock listed for sale

    Saanich with some 110,000 people and 49,700 dwellings has 364 listings.
    1;302 and 0.7 percent of the total stock up for sale

  114. You could be right. If your home appreciates enough you can afford the down payment on a more expensive home.

    Ie. if you bought in 2009 say and now have an extra $140,000 in combined mortgage pay-down and appreciation, plus your initial $120,000, that gives you about $220,000 net (or more) to go into the next purchase with.

    This combined with the expected increases in salary over that time period plus perhaps the kids being out of daycare and you can now afford an $800,000 home if you sell. Maybe the next one has a suite and you are actually paying less each month out of pocket than you were before.

    Be interesting to see what happens come spring. Sellers who plan to buy in the same market don’t really reduce the competition, although they may shift it to higher value markets. Only those getting out do.

  115. Looking back on the last decade of November house listings in the core there was only one year when listings did not decline and that was November 2008. That may mean that this November 2015 is likely to have a lower number of active listings than October 2015. Bad news for someone looking to buy a home in the core due to below average selection.

    Two years stand out as having the lowest number of active house listings in the core for the month of November they are 2006 with 311 active listings and 2007 with 278. Last month the core had 466. That is bad news for those that feel they have to buy a home. Not necessarily because of price but the below average selection in houses. And that low selection affects Victorians as well as out of town buyers. Victorians though may have the option of waiting for better properties to come up for sale.

    The silver lining is for those that can wait; as active listings have always increased substantially after a prolonged low level. After 2006 and 2007, active November listings rose to one of the highest levels in 2008 with 746 listings. With some of the highest level of listings in the last decade occurring in the summer of 2012 when the core came a few short of breaking 1,000 house listings.

    My feeling is that there a lot of home owners that would like to sell and buy another home. But with so little selection to choose from they are holding off on listing their house. What has happened in the past is that as prices rise, the number of sales declines and that causes inventory to rise. At some point those that were holding off from listing see an advantage to sell and they list their homes. And the market goes from a bust in listings to a boom in listings.

  116. We have seen a similar turn around in home prices in our market and this is already the best year for my brokerage and we still have two more months to go! Glad to see other markets are experiencing the same thing we are.

  117. Adding a basement suite to a turn-of-the-century character home can easily cost between $80,000 to $120,000. Excavating, foundation, drain tiles, concrete flooring, updated electrical panels, hot water tanks, drywall, flooring, cabinets, counters, heating, asbestos removal, appliances, etc. It can take 2 to 4 months waiting for approvals and scheduling trades.

    A Gordon Head box will be a lot cheaper. Depending on existing roughed in plumbing and the basement being above ground.

    -Think before adding a suite.
    -What will it cost you?
    -Investigate contractors for a good reputation
    -Talk to the city before you begin.

    It should be easy for you- just remember the acronym.

  118. Funny I just mentioned it looked like Mike’s family showed up the other day with similar pumper posts. Glad your on it David, don’t need that kind of riff raff on here. 😉

  119. I do not have a RRSP loan. I have had a loan to max the contribution before. That was some years ago but I recall it needed to be repaid within 12 months. The refund was applied to the loan and it was an okay way to go as we didn’t have any spare cash.

  120. Unfortunately, I’m beginning to see multiple posts from the same user (IP address) using different identities. I’m reluctant to force users to be registered and logged in to comment, but will do so if required.

    If you are beginning to find that you posts are being screened and not approved – check that you are not posting under multiple aliases. – you are using 5 aliases – your are using 2 aliases

    Please clean up your act!

  121. Prices in most desirable places in Canada are up close to 50% in the last decade, except one location, Victoria core.

    So I expect houses that are say 700k to easily go for 880-920k soon.

    Victoria has always lagged the country by a few years, so even if the market corrects elsewhere we will have at least 3-4 years of strong upwards pressure.

    The other thing is, most homes owned by the last boom of people, the WW2 generation, they have sold somewhere near 80% of their homes in the last 4-5 years, with only a few 90 year olds still holding onto a few properties that will be dumped onto the market for someone to put 200k into to make livable.

    There is no easy pickings coming up for housing stock, that generations houses were sold off almost in entirety, so there is no major housing “dump” coming up anytime soon till the baby boomers start to die off in 30 years

  122. The lending rules for getting a home loan in Canada is super tight now, and has been for a while.

    Only up to 65% equity can be borrowed, I highly doubt that a house that is 900k will drop to 550k by spring or even anytime soon.

  123. What do you mean? Are you comparing a RRSP loan to a HELOC? Doesn’t an RRSP loan have a short term (ie. usually a year) and a higher rate?

    The idea with the HELOC is that you remove the money, do the RRSP and put the refund into the HELOC to be borrowed to invest in an unregistered portfolio.

    I’m not sure how this is funding consumption.

  124. And it seems as though the amount that can be borrowed on a new HELOC has been lowered to 65%.

    If you bought a $600,000 home5 years ago with 10% down and your home is now worth $650,000 and mortgage is at $490,000 you are really far from qualifying. Even with 20% down you are still out of luck.

  125. I don’t know how many are borrowing to invest.

    The Smith Maneuver has been around since 2002 and the guy who came out with it was local so probably some are doing it in Victoria. I know others who HELOC to buy an investment property. Some in the US several years ago while rates were low and the dollar strong. Turned out well for them.

    A HELOC is a great way to fill unused RRSP and TFSA room imo. High rate debt consolidation is also a great way to use a HELOC provided you don’t rack up more high rate debt. Having high rate debt (ie. credit card) is a warning sign though, I’d be extra careful with this is you are a spender.

  126. Who is spending $100,000 to put a suite into an existing space? If you want to put a suite in keep this in mind when choosing the home to start with and look at where the sewer stack and water lines are, as well as exterior entrance.

    It states here that the average suite costs $10,000: http://www.theglobeandmail.com/globe-investor/personal-finance/home-cents/how-to-turn-your-home-into-an-income-property/article4304277/

    I’d say more like $30,000 myself. If you are charging $1000 a month it is a three year pay back for the costs out of pocket. My bet is your place will also be worth $30,000 more. In other words, instant payback.

    The additional property taxes are max $300 a year if anything at all. When I installed a legal suite my assessment was never adjusted despite having a permit from the city. I pay no extra taxes. The utilities are something you can charge for.

    What small market correction would you be talking about? The topic was using a HELOC to put a suite in. You can’t borrow more than 80% of the value of your home, total including existing mortgage. A small correction isn’t going to do anything at all in respect of pushing you underwater. The correction would have to be 18% or more for those at the max. Seems highly unlikely to me currently and if you have an extra $1000 a month you can likely whether some additional expenses in the event of a rate increase.

    There are all sorts of reasons for building a suite that don’t mean you are at the financial edge. You want to retire early, you want a place for your mother to stay, you want a nanny suite, you want your grown child to have a place to stay, you would like extra income for another reason like helping a relative out. If you are on the financial edge I’d say it is one of the best ways you can spend your money.

    A lot of people would be happy with an extra $1000 a month in exchange for renting out a separate suite even if they have other savings.

  127. A lot of the HELOC’s are used for debt consolidation. Rolling $25,000; $50,000 and more of credit card debt into the home mortgage.

  128. I suppose it depends on what you consider a short payback period. I heard on a real estate commercial that people typically move twice every ten years. If the suite cost a hundred grand to build and the rent is $1,200 per month, I would say the payback period is too long. Since the typical home owner is more likely to sell the home before the cost of the suite is paid off.

    Off course, some might be more frugal than others and just re-furbish a finished basement and install used cabinets. Then the payback period would be shorter.

    It isn’t a simple straight forward answer if adding a suite is a sound investment. While most often homes with suites tend to sell for more than homes without suites it depends on where the property is located. In Victoria you are likely to get more for your home. In Sooke not so much.

    How much more? If you spend a hundred grand on a suite chances are you will not be getting most of that money back when it comes time to sell. If you spend 10,000 or 20,0000 – you probably would see an increase in value equivalent to your cost.

    And so will the tax man when it comes to property taxes and utility charges.

    And then there is risk. You are putting all of your eggs in one basket. For some, a small market correction can put them upside down in their mortgage. With the mortgage larger than the value of the home.

    And let’s be frank, if you feel the need to build a suite then you’re most likely finding it difficult to make ends meet today.

    You might want to do the number crunching before taking on the construction as well as get a valuation of the property as it is today and what the value would be upon completion of the suite to see how viable the project is.

  129. The % of people borrowing with their HELOC to invest must be almost nothing. I know very little people who even invest at all let alone borrow to invest. Most people I know use their HELOCs to renovate or buy big items.

  130. I’m a fan of helocs used wisely. Cheap way to borrow to invest which is good debt. And the interest becomes tax deductible. Borrowing to build a suite generally has a high roi and short payback term. Your home value increases and you get an income stream. I’d borrow to upgrade a kitchen or bathroom too in some cases. I wouldn’t heloc for consumer purchases.

    And if you are borrowing to invest a heloc can really pay off. The limits on helocs make it unlikely that folks will be unable to manage.

  131. Continually extracting equity out of your house means it will never be paid off, hence debt slave. Never mind you are exposing yourself to more rate risk by increasing your large debts.

    As for a productive use of the money, I’m not saying it can’t be done, but in most cases the extracted money goes to consumption. Building a suite might be worthwhile but most upgrades don’t pay for themselves, so that new kitchen is mostly a consumption item.

  132. You obviously didn’t read that article. It’s a really old study, and they found mild correlation to 20% of any dollar gained in housing to be spent.

    How is spending 6% or 20% of a total gained dollar of wealth “debt slave”?

    These people made 80-100k of tax free money!!!! How the heck is that bad???

    And spending a small percentage to build a money making suite or upgrade house… How is that bad???

  133. It’s looking finally very pretty for many homeowners that have been waiting for prices to finally rise after 8 years of stagnation.

    I know 3-4 owners that are feeling great that come spring, they can get their houses reassessed for 50-80k more and do all kinds of great renovations.

    No one I know wants to sell, just reno with new funds, half will be building a suite.

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