Renting Is Getting a Lot Easier in Victoria
We know that the COVID situation has taken a big bite out of the housing market, with sales by the end of the month projected to be down some 55% from this time last year. But the rental market may be just as affected, and it’s not because of the rent freeze or the evictions ban.
Read the rest of my article in The Capital
The student and AirBnB exodus is temporary, but I’m most interested in whether population growth will slow substantially as I predicted in the article. After I wrote the Capital article I saw a chart from Capital Economics showing how population growth from net immigration in Canada decreased after 4 of the 5 past recessions. If it happens again that would reduce upward pressure on both rents and house prices.
What does this mean for buyers? Well I’ve gotten considerable interest in the past weeks from investors that are looking to scoop up some deals in the coming months. There may very well be good opportunities coming up in the market, but when you’re modelling future cash flow I would be a bit more cautious about rent growth projections and vacancy rates. An increased safety buffer will not go amiss.
New post with monthly market numbers. https://househuntvictoria.ca/2020/04/30/the-month-of-no-good-very-bad-numbers/
I agree. Many businesses will go under during this, but there will also be a time of great opportunity in the void with underserved markets and easier access to talent.
A couple of years and we’ll be mostly back. When social distancing declines we’ll need more ( yes more) government spending for a bit to prime the pump and then the private sector will come roaring back.
Canada will suffer a bit more than some countries because of our oil reliance
2019?
No. Although we don’t do it (have a firefighter neighbour and don’t want disturb him), I think people do it to thank all healthcare and essential workers, also to cheer themselves up, at this difficult and unprecedented time.
So when people are banging their pots at 7 p.m. every night, they’re doing it to thank two nurses!
Jeez, I’ll say. I guess they’re playing the “subdividable”/”multifamily” development angle.
Even the assessed value of 640k sounds high. It’s Happy Valley for goodness sake. Not like there’s a shortage of land in those parts. I’d pay ~450k for that, if it were the kind of property I was into.
One of the most delusional listings I have seen in a while: MLS#:424507. But on the rental topic, I am still amused on seeing people trying to rent suites in Sooke between $2000 and $2500 per month. I give the developers credit for selling people on mortgage helpers out there, but seriously, what’s the sales angle to a renter? “live an hour away from work and pay premium to live in a basement”. It’s just funny especially when the rental deals in town keep getting better.
… and 444 tests yesterday with 0 positives on VI.
Stats for our Vancouver Island Health region (pop 785,000) are great today.
0 new cases, 0 new deaths,
120 total, 92 resolved, 28 active cases, 4 in hospital, 0 in ICU, 4 total deaths
For some perspective, if we compare those VI numbers to a successful CoVid country like Australia, the results are very similar!
(All data is per million population)
Cases (per million). VI=153. Aus=265
Deaths VI =5. Aus=4
Critical cases vi=0. Aus=1
Active cases vi=36. Aus=37
Testing VI=16k Aus=23k
Source: worldometer and BCCDC.ca dashboard for April 30/2020
So what do we have in common with Australia that might explain this? Answer: we’re both islands, with low population density, and great Health care.
Leo S
Many local stores still need to learn to put their inventory online.
Leo:
Stock market is up primarily driven by fiscal flows (next week we will see the largest deficit in US history) and the feds buying up all the triple AAA assets, driving yields into the negative territory. Money is now moving into riskier assets to get a return.
The 4 Stages Of A Bubble https://e.businessinsider.com/public/1572167
Jean-Paul Rodrigue – https://en.wikipedia.org/wiki/Jean-Paul_Rodrigue
It will go forward to the new normal. What will that look like? I speculate it will be moderate social distancing combined with an accepted reduction in average lifespan.
Barrister
I hate to agree with GWAC ( I really dont usually) but I suspect that he is correct and that the recouvery is going to be much harder than anyone believes. I hope that I am wrong, really wrong. Getting Canadians to accept a lower standard of living might be more of a shock than anyone is prepared for at this point.
I prefer to call it a realistic standard of living. This will be a shock for many. You mean we can’t go on exotic vacations every year? The past years of high standard of living fueled by debt is not healthy for anyone.
The British-Swedish Pharma company AstraZeneca has started mass producing their CoVid vaccine already. It was developed at Oxford. They expect to have 100 million doses ready by end of 2019. They are manufacturing before the testing is completed, which they hope will be completed by end of 2019, and then they’d be ready to go. That would be a nice Christmas present for the world. Of course if the vaccine fails the tests, they will throw away the manufactured vaccine.
https://www.msnbc.com/msnbc/watch/oxford-university-developing-coronavirus-vaccine-says-could-be-ready-by-year-s-end-82828357797
The financial markets are by and large now governed by only one thing: monetary policy. Their recent trajectory in the face of the main st. economy being in absolute shambles is very telling of the disconnect. Every economic forecast coming out is nothing short of god awful. The markets are quite the abomination, but hey, where else is all the newly printed money going to go?
Municipalities and universities especially.
I’ll venture to guess it’s because Canadians have forgotten what an economic shock feels like, or are too young to have experienced one. We dodged 2008, which the Americans were sobered by. This has bred a culture of moral hazard, especially with regard to real estate. Even now people are shopping for “deals” in the current market. Nuts. I guess they call it mania. If you are patient though, I’ll wager you can make a killing. We’re in the first inning of this economically speaking. It will take some months before the dust starts to settle and we will know what we’re dealing with and what lies ahead for the economy. I imagine it’s going to get really bad. But if central bank balance sheets can indeed go to infinity with impunity, who knows, perhaps we can all become billionaires before this is all over.
“Just shocking what the stock market has done though. Expectations are that this thing is over and has basically no long term effect if one were to go by the market.”
Someone needs to post Hawk’s graph. I think this is what is referred to as the “denial” stage. But who knows, perhaps the shortest bear market in history has come and gone, despite the specter of double digit unemployment and a double digit contraction in Q2. It would suit our post-reality era. Still, I’m going to hedge my bets that the worst is yet to come.
Stock Markets are held up by the fed central banks worldwide going to zero rates, printing money, buying bonds/bond ETFs and some buying stock ETFs (Japan, Switzerland).
And that’s separate from the government direct support of people and businesses. The cost of all these programs is outlined here, currently $145 billion CAD “direct support measures” and $586 billion “grand total” which includes loans… so far. https://www.canada.ca/en/department-finance/news/2020/04/support-for-students-and-recent-graduates-impacted-by-covid-19.html
Hopefully we get rid of the virus or find a treatment/vaccine, because they won’t have success doing this forever.
Wow, what a great quote.
Good point gwac. I hadn’t thought about it like that. Amazon’s only issue is not being able to handle the wave of demand. I think Frances Bula said it best on twitter:
Leo
stocks are where they are because the big companies that make up the bulk of the TSE will do just fine. They will come out more efficient and have less of a cost bases. Tech which makes up a good % of the tsx. 2nd largest company on TSX is a tech company is doing just fine. TSX/DOW and s&p 500 do not represent what is going on on main street.
A reasonable effort means asking market rent, i.e. a rent that someone is willing to pay. If you cannot rent within a month or two you are asking above market.
Landlords didn’t object to market rent going up due to external factors and they shouldn’t object to it going down either.
I’m not so pessimistic about it, but some industries will be crushed and biggest pain will be felt by those with fewest means which is tragic.
Just shocking what the stock market has done though. Expectations are that this thing is over and has basically no long term effect if one were to go by the market.
Barrister you must be confusing me someone else. We rarely disagree 🙂 Except I never believed you were actually leaving Victoria. lol
I have to think that the province will not charge spec tax if you’re making a reasonable effort to rent your unit. Optics of slapping spec tax on people if they have a longer vacancy due to COVID would be terrible.
It’s basically up to your lender
“CIBC, RBC, TD, BMO and Scotiabank all said that landlords have the option to defer their payments regardless if they carry insured or uninsured mortgages. A few banks, including Scotiabank, give the option to postpone mortgage payments for up to three non-principal residences.”
https://www.cbc.ca/news/canada/toronto/mortgages-landlords-rent-covid19-coronavirus-economy-housing-1.5508868
I hate to agree with GWAC ( I really dont usually) but I suspect that he is correct and that the recouvery is going to be much harder than anyone believes. I hope that I am wrong, really wrong. Getting Canadians to accept a lower standard of living might be more of a shock than anyone is prepared for at this point.
One chart below from Leo
the 250 to 300b deficit this year and 50 to 100b next year. 15 to 20% unemployment this year 10% to 12 next year.
Anyone thinks this will all go back to normal goodluck. Even those cushy government jobs are at risk. We are in for 10 years of pain in trying to get back to pre virus.
The gov free money is the only thing holding things together and barely.
I’m impressed, Gwac. Say, do you have a chart somewhere that can visualize this reckoning?
🙂
wow Canadians are swimming in debt. The government is boating in debt. What could possible go wrong…I know everyone is focused on the virus but the day of reckoning will happen. Raising taxes is not going to solve things. My bet is the socialists will attempt to fix it that way.
Careful out there its going to get more bumpy.
Patriotz: You are absolutely right about the fact that kids go out into the community but that is one of the ultimate truths that this will spread. The Darwinian truth is that seniors have had about six weeks to figure out how to create a bubble for themselves or decide to just risk it. Some measure of defense has been put up around the nursing homes and the rest of us old farts are on our own.
I hope that Dr Bonnie starts to give a very clear message that while things are opening up they are not necessarily very safe if you are over 60 or have health issues. Hopefully between guarding the nursing homes and having a fair percentage of seniors bubble themselves off we can at least keep the hospitals from being all swamped at the same time. The goal is primarily to spread out the number of hospitalizations. Reducing the total number is great but is secondary to spreading them out over months.
Problem is that those students go out to the larger community. It’s not just about the university staff. Same issue with kids in school.
Well the simple answer is that changes in house prices are almost entirely due to changes in lot value. The building cost isn’t changing to any great extent. Thus if a property is lot value it will see a bigger % decline than a property with a more valuable house.
In addition, the market for lot value properties is heavily influenced by builders. If prices are falling that makes it riskier for them to buy a lot value property and build a new house. Thus they will adjust the price they are willing to pay downward based on future expectations.
This is just what we’ve been seeing in the price declines in west side Vancouver over the past few years.
From here: https://vancouversun.com/opinion/columnists/douglas-todd-covid-19-crisis-set-to-hammer-metro-vancouvers-housing-prices/wcm/0fe3debf-7efd-497e-83da-38ec37ff4f77/amp/?__twitter_impression=true
Barrister, your breakdown hit it perfectly.
After watching the COVID crisis evolve and watching how people react to the ‘imminent’ threat of serious health consequences, I’ve noticed people react in the same way a governor works in an engine. A governor is a device used to measure and regulate the speed of a machine, such as an engine; when the engine speeds up too much the governor automatically slows it down.
In other words, when people perceive the threat of COVID is ‘speeding up’ they back-off, stay indoors more, and keep far apart when outdoors. When they go outdoors they have masks and maintain social distance.
However, when people perceive the threat is slowing down they start to relax a bit, go shopping more frequently, they stop and chat, they don’t wear masks and that speeds up COVID transmission rates.
So depending on the level of imminent threat, people either embrace or ignore the COVID recommendations. Imminent threat level acts like a governor.
I’m now thinking the ‘imminent threat governor’ will protect the hospitals from a rapid and sustained deluge of COVID patients, although the governor will have a 10 day reaction time, so although infection rates and hospitalizations might get a big bump, it will self-govern and scare people into taking social distancing seriously again. This will probably make hospital admissions and deaths look like waves when graphed after this crisis has subsided.
I am defintively noticing this as well….showings way up on listing, etc. One of my clients tried to shake my hand on Monday when I gave them keys to their new home. Effort is dropping off quickly imo.
I am starting to notice that the social distancing is starting to slowly diminish over the last couple of weeks. Not surprisingly the young have become impatient with it as they dont perceive this as a real threat to themselves. In fairness they are not wrong and in the vast majority of cases it is only grandma and grandpa at risk. ( I am in the high risk group by way of disclosure).
It is time to reopen even if it in a staged manner. I think it is fair to acknowledge that through both luck and relatively efficient distancing measures that BC has done a great job of flattening the curve. It has certainly bought six weeks for the hospitals and medical system to prepare for the onslaught of new Covid cases. It also allowed us hopefully to increase the defenses at the nurses homes. But there are some realities that must be accepted.
1) The number of Covid cases in hospital and the number of deaths will rise fairly quickly as the economy opens up again.
2) The purpose of flattening the curve was never to eliminate Covid but rather to spread out the hospitalizations over a number of months so that the hospital system is not overwhelmed.
3) BC is in a more precarious position than Quebec in opening up the economy ironically precisely because we have done such a good job of flattening the curve that many have argued that we have actually delayed the onslaught rather than flattening the curve. Put another way, assume that over the summer the Covid virus will hospitalize about 12,000 people (12,000 is not a rel number and I am only using it as an example) and that at best our hospital system can handle 6000 at a time. The object of flattening the curve is to get about 4000 cases a month over three or four months and never more than 5000 or at worst 6000 in any given month. If the hospital system is overwhelmed you are going to end up with a lot more deaths overall not just from Covid but from other causes such as accidents or heart attacks.
Because BC has had so few cases it is still possible that Covid could still swamp the hospital system. Quebec has had enough cases that it is unlikely that the hospitals will be totally overwhelmed with Covid cases.
4) The good news, if there is such a thing with a virus, is that Covid hospitalizations are almost all in people over 60. (You can adjust that number to those over 50 if that stops the arguments). Practically what that means is that in some larger organizations like Universities one can open up as long as measures are taken to protect the older staff. Social distancing is not going to work on campus with a herd of young ones. Naturally you can try to implement masks and distancing but that is a very limited effort to slow the spread and not realistically to prevent the spread. The spread will occur.
5) We have to accept that eventually a good portion of the population will be infected, that is inevitable over the coarse of this year. Even with the best measures in place the nursing homes in many if not most cases will also be infected. (Harsh reality). What we are aiming for is that not all the nursing homes are infected at once.
6) Opening up again is absolutely necessary but it will require both skill and a lot of luck. There will be dark days for a lot of families.
I haven’t noticed any changes – people still observing the distancing and wearing masks/gloves. I’m in favour of all these things and have no problem doing them for as long as needed.
The hard part for me is considering what it means for my children to have a year of online living and continued closures. They’ve had all sorts of things disrupted with schooling/career by the general global shut-down and institutional move to online. It does make me wonder what the next 12 months will look like for the economy if institutions and businesses don’t try to open in a modified manner that is not entirely online.
Can you refer mortgage on an investment property? Someone here said you can’t.
Great article Leo. And if that vacancy lasts 6 months, the landlords on this huge number of vacant units will have to pay vacancy/spec tax for 2020. But only if they are in a spec tax area like Victoria, other areas of BC like Whistler or Chilliwack are as usual not charged spec tax for vacant properties. Shouldn’t the spec tax be removed for cities like Victoria if their vacancy rate rises to levels where it wasn’t applied in other BC regions?
Not in the Thrifty Foods store I went today. Maybe it is the time (around 2pm in a weekday), no change from a week or two (or three) before, except there are more food supplies and more people wearing mask. We had a very close brush with Covid-19 recently, so plan to continue physical distancing and to wear mask and gloves in public places (stores, restaurants, banks, post offices, libraries once they are open) until the vaccine is available to all, regardless how long the wait will be.
Good article on the Capitol LeoS. Small error though in this sentence: “… the city was best by spiraling rents …”. I think you mean ‘beset’ not ‘best’.
After reading the article I kept thinking of the ‘investors’ who bought houses to subsidize renters in the hopes of profiting from appreciation. If I was in that situation now I’d be worried; renters will be harder to find, landlords will be competing on price to attract good tenants with secure government jobs, and vacancy rates will be increasing rapidly.
A significant percentage of construction industry workers in Victoria are not from Victoria so they will likely be returning to their hometowns soon. And, overall, Victoria simply will only need a smaller workforce for the next 18 to 24 months and that means less people looking for rental accommodation. And the penultimate headache for the ‘investors’ will be the rapid evaporation of their paper appreciation profits. The final nail in the coffin for these ‘investors’ will come with the realization that their downpayment equity might disappear if the property is sold; leaving them with a conundrum;… sell quickly and lose all equity or rent at a significant monthly loss and slowly go bankrupt while hoping for a quick market turnaround.
Tenants will be moving frequently starting in a few months when landlords start competing on price. Why would a tenant stay in your rental suite or house when the same is available for a few hundred cheaper somewhere else.
The Victoria housing market in 18 months will be radically different than it was two months ago.
Yup.
Noticing big changes at stores now. Plenty of people around and folks aren’t making the same effort to avoid each other as before. Before, I could sense the fear or attention I got when I went down an isle of a store (people getting out of the way, or even turning around to go the other direction). As of yesterday, almost no one I saw was doing that and several people actually got right into my space. Basically, it was almost normal – except oddly enough, there were still a lot of masks.
Right or wrong, it’s not like this wasn’t foreseeable. It’s not human nature to behave in the globally ostracizing manner we were, and while we can do it for a time, sooner or later once the novelty and fear wears off, it won’t matter what Bonnie Henry says.
Be curious to see what happens to behaviour when the next wave comes, because it probably will.
Good point even for long term rentals. I’ve always set my rentals up to be cash flow positive; however, on qualification for the mortgage(s) it has always come down to my corporate/personal income and the rental offset(s)s have been a very small portion which would make me think that a lot of people would have to lose the rental income and their job as well to be in serious trouble.
Secondly anyone holding variable mortgages on rentals is doing okay on that front. One of my condos is at 1.25% right now. Assuming tenants don’t bail and keep paying rent some landlords will be ahead with the drop in interest.
Yeah looking at the sales / list ratio it’s just bizarre. Small bump in sales while new listings keep declining.
Starting to see multiple offers again…..mind boggling but there just isn’t any half decent SFH core inventory in certain price segments. I let two inspectors into houses two and both said their schedules are filling up again. I am predicting even without social distance easing measure we will hit 500 sales in May.
I’ve been saying this for years….AirBnB only makes sense why you pay yourself next to nothing for your time. When I sold my one bed at the ERA they were going for $1,500 per month and in the summer time I saw one beds on AirBnB for $129 per night.
$1,500 per month or $50 per night 365 days a year with no effort sounds a lot better to me. You might get $129 per night AirBnB but you have expenses, vacancy, lower rates in the winter, etc., etc.
Your graph shows a 2015 recession. There was a slowdown, but according to CD Howe it didn’t quite reach the level of a recession.
Wasn’t very satisfactory. Profs did their best but I know that in least one of my son’s courses he didn’t have to write the final – it was optional and only those looking for a grade boost from the mid-term results did it. He’s taking summer courses now too so we’ll see if things go a bit more smoothly. I think student voices asking for tuition reduction will grow if it is online only in the fall.
Students will be fully back at some point. AirBnB is going to take longer to bounce back:
First of all tourism is going to have to bounce back which is going to take a while.
Second as we discussed previously “I can make more money in short term rental” is not a valid grounds for eviction. So landlords wanting to go back to AirBnB are going to have to wait for tenants to leave, come to mutual agreement to end tenancy, or evict under family use provisions (this will be legit in some cases where immediate family does sometimes use the space, but I guarantee it will be abused in some cases)
Finally some landlords may decide long term rental is a whole lot easier than AirBnB. As several owners have stated here – if you find good tenants renting out can be some of the easiest money you ever make
Well it happened just now (all exams online) and will happen again in the summer semester.
That’s the sticker I think. The university has to be prepared to open residences if they’re going to expect people to be on campus. Can’t say you have to be there but we’re not giving you housing. There would be a revolt.
I hear ya. It seems like the US is starting to revolt against restrictions and will open up regardless of what happens to cases. We are more polite here in Canada but the tension is building too and people will follow the same path. Can’t say I really blame anyone. When your livelyhood is gone that becomes the most important thing.
It definitely won’t be business as usual, but my bet is that some sort of hybrid model will be the goal with an emergency back up of fully online should there be an outbreak on campus, or more generally in the fall. Hard to think that all testing will be done online. I’m not sure what is possible as this is a scheduling/planning challenge. Covid affects all sorts of things – like on-campus housing with shared floor bathrooms and roommates. There may be an even greater demand for off-campus housing if the hybrid model is followed.
I’ve got three kids in university this fall. I’m getting tired of the impact for them and life only turned this direction six weeks ago! Becomes quite a bit more daunting to think about going through at least 52 more weeks of covid life and I’m not sure what our housing market (or general economy) will look like a year from now.
I’m not really predicting they won’t, but here is what the university is saying, posted by a prof on reddit:
“the university has been asked by the provincial government for feedback on the feasibility of running fall classes either fully online, or in a hybrid model, depending on the prevailing advice from the Provincial Health Officer.”
The assumptions we’ve been given to work with include:
At this point I think it’s fair to say that we don’t know for certain, but that I would bet against “business as usual”
https://www.reddit.com/r/uvic/comments/g7hlab/do_you_think_the_fall_semester_will_be_online/fohhjs3?utm_source=share&utm_medium=web2x
Summer semester for engineering students is 100% online, including labs (however that will work).
Could be a system as you describe (lectures online, labs in person). Either way it won’t be up to the university, it will be up to the province.
I was interested to read that you don’t think post-sec students will be returning in September for classes. I had expected they would, albeit in a different format. Maybe that is not realistic, but there are certainly many programs with components that just cannot be completed online. I would expect the university to open in September with social distancing in place, lectures given in real time online but accessed at home or via labs at school for students who would prefer that, and labs and testing to continue with staggered scheduling on site and even more TAs hired. Hopefully mask wearing on campus would be mandatory.
Maybe UVic won’t do this but it seems like many US colleges and universities are already planning this or have announced they will open.
New listings are shockingly low right now.
