How (relatively) unaffordable is Victoria?
This post is 6 years old. The data and my views may have since evolved.
What is it for a house to be affordable, and to whom? The term gets tossed around a lot, but everyone has a different idea of what it means. To some people, affordable housing is an apartment that they can rent using the $375/month provided by BC income assistance. To others it’s what can be afforded by a single parent making the median individual income of $37,481 annually (that’s about $19.50/hour). To a double earning household it might be what they can get at their average income of $109,913. The point is; affordable housing is different for everyone across the housing spectrum, and applies equally to rented as well as purchased housing.
Keep reading the entire article on The Capital.
Yup. Hence why I focus on affordability and price / income not just price
You can’t discuss housing affordability just by looking at the prices of the houses and condo the real issues is the income of the buyers
Sorry for the site interruption. Server upgrade.
New post: https://househuntvictoria.ca/2019/12/02/november-single-family-sales-regain-pre-stress-test-levels
All articles I read on “affordability” in Victoria end up talking about how un-affordable housing is in Victoria, especially for young people. We are told that this discourages people from moving to Victoria.
Trouble is, these articles don’t explain the parts of housing affordability that are just fine for Victoria, BC and Canada as a whole – namely the cost of renting.
70% of young adults in Victoria don’t own, so they rent (or live rent free). As the chart in LeoS article shows, Victoria is close to the national average on rent (15%), close to a city like Winnipeg at 14% and much lower than Toronto or Vancouver. Now if you were a young person considering moving to Victoria from Winnipeg , would you be even be slightly concerned with the prospect of spending an extra 1% of your income on rent?
Moreover, while Canadian home prices are 43% higher than USA, our rents in Canada are 35% LESS than the USA! https://www.numbeo.com/property-investment/compare_countries_result.jsp?country1=Canada&country2=United+States
If we realize that rents are affordable here, and 70% of (Victoria) young people rent, it ruins the narrative that there is a BC housing “crisis” for young people, affecting their ability to have the basic right to “shelter”. And turns it into a much different problem of “owning” a house vs renting one, which isn’t a problem the government needs to solve.
So do we have a housing crisis here? No, because rents are cheap by city, national and international standards. Renting is a much better deal than buying, and our millennials who live here have figured that out. Part of the reason that millennial ownership rate is so low is that they could afford to buy, but choose not to because renting is a better deal. That’s good news, and not a problem to solve.
The reason the $1,300/month person is leaving the basement suite is she or he feels the $1,500/month new apartment is a better value; therefore, the suite isn’t going up to $1,500/month. You can ask for whatever you want but the market sets prices in the end.
That’s inconsistent with Marko’s example of new rentals downtown going for $1500/month. Anyway, that basement suite would rent for more, when it eventually hits the market, if those new rentals downtown hadn’t been built.
The problem is, the recently vacated basement suite that rented for $1300/month will be $1500/month for the new lessee.
Strong last week. Looks like basically 600 sales for the month which is well above the long term average of just under 500. Under 400 is a slow November.
Condo owners in BC will now be paying much higher insurance rates
Rates are increasing for people in policies now anywhere from 50 to 300 per cent, and deductibles are going from the conventional $10,000 or $25,000 to $100,000, $250,000 or $500,000,” said Tony Gioventu, executive director of the Condominium Home Owners Association.
The reasons for the surging rates are multiple, but one of the factors is the sky-high value of B.C. properties.
“Anyone now purchasing into a condo and into any strata corporation in B.C., one of the documents you want to request is a copy of the insurance policy,” he said.
“Look at what the renewal date is, look at what the values are, the deductibles, what the rate is. And if it’s coming up to a renewal, you might want to wait a bit.”
https://globalnews.ca/news/6237709/bc-strata-insurance-surge/
Based on your own observations, can you give me some indication of the profile of buyer(s) that you tend to see buying these homes? ie, single, dual, income level, down payment, FTB/move up buyer etc…?
Usually first-time buyers fixated on a SFH in the core. Personally, at the 650k-750k I would look for a townhome or half duplex in the core, but a lot of people are opposed to anything with the word strata in it. There is obviously limited inventory of SFHs in the core, so my feeling is you get these places where the value is like 550-650k getting pushed up to 650-750k. I feel at like >850k you start actually getting what you are paying for.
It is always dual income. I can’t remember when I had a couple under 40 yrs old where both weren’t working.
Surprising number of FTB that have 20% down. Obviously not a lot of cash buyers in this market segment.
I don’t think people are smart enough to figure out such as simple concept. When a rental tower goes up downtown all the comments you see are “I can’t believe units are starting at $1,500/month…..that’s not affordable.”
They can’t grasp that simple concept that someone moves out of a $1,300/month basement suite to rent a $1,500 apartment; therefore, increasing inventory of available basement suites.
Thank you, Leo;
I love the new Web-design.
Nice article. I have said for a long time that price-to-income is the gold standard for comparison and absolute terms. We are at 7.5 – the highest for a medium size City. One question.
In your article you say: “The Vancouver “refugees” fleeing the Lower Mainland for the Capital Region, meanwhile, might consider it extremely affordable to own a waterfront home for only $2 million”. Leo, where can one fine such a bargain. Waterfront in Victoria is $4M to $5M starting.
Even the land alone exceeds $2M.
I also thank you for your article on “foreign” money – it is the indirect ripple effect from Vancouver-sellers cashing out to Foreign buyers and money-launderers that has spiked the demand here and therefore raised prices to unsustainable levels [so whether it is direct foreign money or indirect, the impact is the same, one removed]. But, as you point out, the disparity in prices remains elevated such that one can still sell a Vancouver home and buy here, just don’t have as much left over in the bank.
Now, with Amazon’s lease of the Post [and entire block in Vancouver downtown] to create a technology hub employing thousands – expect even more housing shortages there. Perhaps they will buy in places like Nanaimo and commute.
Interesting times. Glad I’ve owned Amazon stock for years.
VB
Is there really an affordable problem in Canada?
Perhaps we can take a page from our past and maybe our European cousins.
Happipad inter-generational living – https://www.happipad.com/happipad-blog-the-happenin/inter-generational-living-the-new-but-old-housing-trend/
From the previous discussion last week.
7% return per year on investment is being conservative, but it still shown that solar isn’t that competitive as suggested even for DIY project.
Total saving and compound interest on $11,700 for 25 years (or as long as the service lifetime of the panels) at 1.5% (the different between 7% & 5.5%) would be $16,976, and that not factoring in maintenance, premature failure or degradation of panels. Therefore, it doesn’t require a spreadsheet to calculate the negative return.
S&P 500 Index: since its inception in 1926 through 2018 is approximately 10%. The average annual return since adopting 500 stocks into the index in 1957 through 2018 is roughly 8% (7.96%). – https://www.investopedia.com/ask/answers/042415/what-average-annual-return-sp-500.asp
Found on twitter. How new construction helps people even if they can’t afford it
The rental rush: Investors are scooping up apartment buildings — and tenants are getting squeezed
https://www.theglobeandmail.com/business/article-apartment-buildings-are-selling-for-billions-and-rents-are-likely-to/
If you hit the paywall, try this:
https://outline.com/zLukMc
Based on your own observations, can you give me some indication of the profile of buyer(s) that you tend to see buying these homes? ie, single, dual, income level, down payment, FTB/move up buyer etc…?
Except for this semicolon, your article was great!
I really noticed the affordability equation since the stress test in my business. This year I listed quite a few properties with the voice inside my head “who on Earth would pay X amount for this” but everything that was “affordable” sold despite me thinking the value wasn’t there.
If condo A is $350,000 and condo B is $450,000 I feel like you get much better value in condo B for the extra $100,000, but the problem is people can’t afford the extra $100,000; therefore, pushing up condo A to $350,000 when it really should be $315,000.
Same applies to SFH homes in the core….just not seeing the value in the 650-750k range but they sell based on affordability.