Construction is faltering when we need it most
At only 877 active residential listings on the market, December not only represented the lowest December on record for inventory, but the lowest month in the 24 years of data we have.
The shortage is most acute in single family detached properties where we have only 229 properties currently listed, but even condo listings are scarce, with December active inventory coming in at the 19th percentile of the historical range for that time of year.
For single family detached, there simply isn’t a lot of options for new supply. Greenfield land is becoming more scarce even out in the westshore, and so the bulk of listings come from the turnover of existing stock as people either leave their house for another town or the great beyond. While we had about 700 single family detached homes built in the region in the last year, many of those are simply replacing existing homes and don’t add anything to the housing stock.
New supply for the resale market then comes in the form of condos. Unfortunately construction starts of those have been lagging lately. In fact in the last 12 months, starts of condos are down 40% compared to the previous period.
Rental starts are also down somewhat, but construction for that market is up so much in the last 5 years that starts are still historically high. Condos however are now down to the 42nd percentile of their historical range.
Anecdotally there is a resurgence in condo development interest, so with some luck we will bounce back from this lull, but with development timelines what they are, we may have difficulty building up inventory without a substantial drop in demand. The focus on rental construction is great and should continue to make up for decades of neglect, but it shows that local governments shouldn’t neglect the ownership market either. Affordability in both markets is helped by abundant supply which keeps a lid on price escalation.
Also the weekly numbers, courtesy of the VREB:
| Jan 2021 |
Jan
2020
|
||||
|---|---|---|---|---|---|
| Wk 1 | Wk 2 | Wk 3 | Wk 4 | ||
| Sales | 107 | 411 | |||
| New Listings | 201 | 879 | |||
| Active Listings | 1319 | 1958 | |||
| Sales to New Listings | 53% | 47% | |||
| Sales YoY Change | +90% | ||||
| Months of Inventory | 4.8 | ||||
Sales generally don’t pick up from the winter doldrums until the latter half of January, but thus far it certainly seems that we’re well above last year’s pace. With the extreme inventory shortage I wouldn’t be surprised if we get an earlier uptick as new listings are snapped up. Certainly price pressure on the detached market is acute as ever, with the median sale in the last three weeks going for 17% above assessment (July 2019 valuation) while condos are at a more moderate 7% over that valuation.
Any new listings will have the 2020 assessments, which will be immediately be just as out of date as the previous ones given that most of the surge in activity happened after the midpoint of last year. New sellers are certainly optimistic about pricing, with the median condo so far this year being listed for 11% over current assessed value while sellers of detached homes are hoping for a staggering 22% more than the valuation from 6 months ago. A sustainable rate of increase? Certainly not, but unless market conditions change that is where things are pointing right now.
Forgive me, I “might” have posted this house before but thought it would be a good reminder of other options. The listing is a full duplex in Moncton. I think it is still available. Owners, private investors? Think outside the box?
I’m just amazed at the difference in the prices.
https://www.kijiji.ca/v-house-for-sale/moncton/321-323-high-st-moncton-new-brunswick/1536613509
Property management is fairly cheap in Moncton. Trades people are very inexpensive. And there is clear room for a large jump in pricing. (For example: Something like this in 2018 would have been available for $175,000.00 or less.) Prices are very much on the rise in NB.
Taxes are a bit high. But not so crazy really.
NB is a hub. New construction – art centers, convention centers etc etc.
Ha ha…..I wouldn’t want to live out east myself. But millions of people do.
We bought there as an investment and we simply get the rent money deposited into out bank account every month. So simple. No tenants to deal with. The property management company does it all.
New post: https://househuntvictoria.ca/2021/01/18/victoria-comings-and-goings/
Barrister, nice new listings at 4810 Prospect Lake for your friend.
Monday numbers (new post tonight)
Sales: 241 (+67% from last year)
New listings: 422 (-4%)
Inventory: 1351 (-29%)
Give Zigloo Studio a call to see what your options are, but I don’t think it is going to be any cheaper than stick built.
https://www.zigloostudio.com/
Hi R Haysom, check out company West Coast Container Homes. They’re currently completing a garden suite in Fernwood. They’re hosting an open house in March. http://www.westcoastcontainerhomes.ca
Is anyone familiar where a shipping container/containers have been used for a Garden Suite in the Victoria area?
@Marko:
What’s selling like gang busters? Just mid level SFH or also condos & luxury listings?
Would you at this time invest in a high quality 1 bed condo if you had the cash?
Welp. Granted low base effect and won’t stay this high, but still.
Market is just wtf…this on a home that’s not even in the core.
Well I think the interest rate boost is gone after this rally so that’s ~2.5% less per year, but that’s still at +3%-4% a year. I could see that going on in the long term short any big sustained negative economic trends in Victoria or if we see rising rates. It’s a low yield world so shouldn’t be surprising that real estate will not perform as it has in the past.
Great graph. Viewers should note that the inflation adjustment is obscuring the nominal price decline during the 1930’s. On the other hand it magnifies the nominal price decline in the early 1980’s.
Question to ponder: can the trends that sustained the real price increase continue indefinitely?
Wrote a piece for the Capital. Mostly stuff I’ve already talked about here so won’t bother with reposting it as an article, but there is one new chart of 120 years of prices in Victoria: https://www.capitaldaily.ca/news/victoria-average-house-million-dollars-data
Young couple talks about buying pre-sale condo in Victoria, how they are financing it, etc….pretty good content imo.
https://m.youtube.com/watch?v=0RQH997uh_w
The houses on Ernest are the source of the flooding, at least in part. It doesn’t help that the houses on Argyle are in the bottom of a bowl.
It’s a bad situation.
Or, lobby to make it mandatory for everyone building in the province, contractors included.
I finally opened my assessment expecting a fight but it went down by 10% and is relatively close to what I paid (within 1.75%). I still want to know how it got so damn high. It was assessed at nearly $100k more than I paid in 2020 in 2019.
Or sell your median SFH here and buy four median condos in Calgary, in cash. Live in one, rent out the other three. Would that be cashflow positive? 🙂
It’s just bonkers.
Calgary property values pounded by pandemic as city sends out 2021 assessments
https://calgaryherald.com/news/calgary-home-property-values-fall-as-city-sends-out-2021-assessments
Median SFH = $445,000
Anyone moving from Victoria to Calgary can take advantage of the 2-for-1 special going on with median single family houses!
For a limited time only! (Probably not.)
Added costs and storage tank aside. The homeowner still face with drainage from overflow.
I’ve been very impressed with many in Saanich council so far. Hard to make change in govt but they’re working on it
100%.
I don’t always agree with the decisions, but there’s no question that this council comprises diligent, caring individuals.
I’ll let Marko handle that grief he seems to like it 🙂
Leo – you should host an owner builder exam section on HHV. Have a donation link at the bottom or something.
So why don’t the people on Argyle install a culvert? I’m not familiar with this area but is this one property the source of the flooding? If none of the other houses are connected to storm (since there isn’t one), is this really going to solve anything? In my mind this proposal is making the current situation better by installing a rainwater catchment system.
Certainly some of the discussion was thoughtful…
Really seems like some letter writing is in order on the owner builder exam. Who knows, new minister it might work
It didn’t sell again…it was another accounting for unrepresented party thing.
Villa Madrona was also subdivided in two lots and sold off separately.
I find it odd that staffers (mid-class people for the most part) whether it be at BC Housing or municipalities put in policies that impact other mid-classers negatively and really play into the favor of the ultra rich.
Saanich staff trying to unreasonably screw over an individual home owner while one development company has 11 large rezoning applications in Saanich. The massive development company has the resources to deal with the staffer bureaucracy and they know a couple of applications will work out every year so they have a pipeline of projects to build. Problem is the barrier to entry is so high in terms of bureaucracy it is difficult for smaller companies to break in and there is less competition in the marketplace.
Owner-builder exam for a garden suite in Saanich or Victoria is another great example. Why not make it reasonable for a home owner to build a garden suite? A developer/builder with 100 employees at no point has to write an exam. They can simply send one of their “representatives” to take some PDP courses every year and that is it.
First email from someone in Saanich today
If you read the documents relating to the issue, you’ll see that all the residents on Ernest have no problems with flooding. It’s the people living on Argyle, downslope from Ernest, that are all having problems with flooding.
I was impressed by the council discussion on this issue. The speakers were thoughtful and on-topic.
Where do you see it sold again? Also this used to be two titles, but one with the same address was sold for $2.7M in 2016, so it’s possible that only one title was left there if it sold now.
Didn’t even see that the staff report recommended against approving the variance: https://saanich.ca.granicus.com/MetaViewer.php?view_id=1&clip_id=484&meta_id=31609
So Villa Madrona in North Saanich sold for 4.25M well below the 6.6M it fetched in 2013?! How does one reconcile that with this hot market and all the growth since then. Am I missing something?
Marko, how many times do you have to touch the hot stove before you learn it’s hot?
Quit building houses on the side if the permitting process is too frustrating for you. It’s not like your day job doesn’t pay the bills.
My favorite is when first time buyers ask me “why is the work on all the homes we are looking at done without a permit.”
And I am just like give a permit a try when you buy a house and report back to me as to how it went.
+1, month number five, still waiting on a permit from COV to build a small simple 1,650 sq/ft home.
Manager follows up
Parks staff finish 5 minute review after more than a month and send back comment that requires 2 minutes of our civil engineer’s time on December 24, 2020 2:09 PM……..civil engineeer out of office until Jan 4th.
Then we resubmitted everything on Jan 4th….on Jan 6th you get a reply of “you need to resubmit the structural drawings as well with every resubmission even if no changes to structural drawings.” Okay fair enough, but why not tell me on Jan 4th?
They accept receiving revision on Jan 7th…….now another month for Parks to approve the 3/4” water line isn’t too close to a tree.
It has literally been 5 months of this. Of course, average person doesn’t understand consider any of this and just complains about the cost of the final product. That being said it has been such a painful process we’ve decided not to even sell the home (a first). Will just rent it out long term.
What will take approximately 6-7 months with the COV a private organized organization would process in 6 to 7 business days, no exaggeration.
Happy to open up this discussion but this grossly over-simplifies things in general.
No, the bylaws are clear on this. If your street is serviced, you must hook up. Not that I agree with this…do the municipalities really expect people to put in expensive (engineered) water management systems and then pay the full hookup cost for overflow? Majority of the houses on my street aren’t hooked into the storm and the surrounding Oaks and vegetation are all the better for it.
If municipalities changed the rules to allow 2.5 stories instead of 1.5 + basement, most people wouldn’t build basements and groundwater wouldn’t be an issue in the first place. Not like people don’t finish/use their attics.
Unless you’ve built / dealt with a municipality, it’s difficult to convey just how complex / difficult some items can be.
One of the concerns shared by some councillors was that the granting of this variance may encourage future homeowners faced with normal-situation sewer hookup costs to attempt the seeking of variances in those cases, too.
This strikes me as a legitimate concern given the costs typically associated with meeting this requirement.
Absolutely. One can argue that this never should have made it to council, since the homeowners didn’t do their due diligence when purchasing the property.
That might be reason #2. Reason #1 is that we’re pompous jerks about things like cherry blossoms.
Truth, but the vortex should extend further into BC
Nothing really unusual that I can see. Fewer new listing than this time last year, and active listings about half of what they were a year ago.
Thx, didn’t look closely enough. Weird stuff, sales back to 2016 reported again today. Shouldn’t make a difference to final numbers though since they would back out the previous month’s numbers.
There are really only like 20 sales…..the others are bookkeeping from last year as a lot of “double end” deal where switched to unrepresented buyer.
63 sales including one over $4M and another over $3M in the last 24 hours and only 39 new listings. Unbelievable. This is normally still the quiet period.
Something like a 45 minute discussion + I’m sure a few tens of hours of staff time. I’m sure council and staff has better things to do. No doubt this is the owners fault or their contractor’s for not knowing this ahead of time, but it does seem like there is no advantage in being hardlined here.
Watched. Rolled eyes.
It didn’t appear that any of the councilors asked the question of whether or not there have been any previous instances of flooding of this or neighbouring properties. If there were, then I’d say the naysayers have a leg to stand on. If not, then how can the addition of a stormwater management system, WHERE THERE HAS NEVER BEEN ONE, possibly be an issue?
Good Lord…
Conflicting views about success of speculation tax in increasing housing supply
https://www.timescolonist.com/news/local/conflicting-views-about-success-of-speculation-tax-in-increasing-housing-supply-1.24265925
This was not a slam dunk no-brainer that somehow Saanich council nearly bungled by voting 5-4.
You can listen to council’s very thoughtful consideration of this matter here:
https://www.saanich.ca/EN/main/local-government/mayor-council/schedule-agendas-minutes.html
Special Council Meeting, Jan. 11 –> Video
Starts at about 1:15:20
Gotta wonder the reasoning of the 4 jerks that voted against? Also, what is the point of planning to the bylaws if the municipality doesn’t abide by them for approval. By allowing them to proceed, it probably saved the Saanich some litigation costs and settlement in the long run by approving.
I am fuzzy on the details (because it was many years ago).. Remember when the nutters on Victoria city council made some retroactive heritage designation to stop that chocolate shop on Government St. from renovating? I believe that ended up costing the tax payers a fair bit cash in a court settlement for council making rules up as it went. Since the business was already well down the road by following the rules that were documented (with money spent), what council did was inappropriate, and had to make restitution. It really doesn’t seem like these lessons get through to municipal governments. Maybe litigation should be considered more often, but too bad that is a big cost for people that are usually in a cash compromised position because of some inappropriate put in place by the regulator.
Is it just me or is there a lot of townhouses coming up for sale lately? This must be townhousers taking the opportunity to move to single family home.
Can’t believe the vote was 5-4. None of the other houses on the street are hooked up. Beyond ridiculous but this is literally every step of the way when you try to do something in Victoria and Saanich and then people are shocked why the end product is so expensive.
Good news for that Saanich couple. They can build the rock garden drainage. https://www.cheknews.ca/a-win-is-a-win-couple-wins-year-long-fight-against-saanich-over-storm-drain-bylaw-733347/
Certainly that was a factor. Remember there was general deflation in the 1930’s – including declining wages. Many people who’d been in debt going into 1929 got wiped out. Confidence didn’t really return until after WWII.
And RE was definitely not regarded as the safe haven that it is today. For those familiar with Vancouver, the City picked up all of Champlain Heights for back taxes. Nobody was willing to pay just the back taxes to acquire it.
Don’t know about books, but this article is a good starting point.
https://thetyee.ca/Life/2006/11/13/Veterans/
Introvert, I am assuming a lower quality reno. I have seen higher end renos that cost $100k for a 800 sqft condo.
I get the feeling those renos were done on the cheap. But what do I know?
I wonder if the issues around people financing a home way back in those early days was more an issue of people not “choosing” to finance rather than not being able to get financing. People in those days had it ingrained in their heads to pay for things as they needed them. Credit cards or debt was something people avoided. I came from Scotland and certainly that was the thinking of my parents. They saved until they could pay cash and saw debt as a wicked, greedy kind of thing. (Living beyond their means. Does that sound familiar?) That idea was heavily engrained in them but they did swing around and adopt the new world. In 1966 my mom and dad came to Vancouver. They had $100.00 in their pocket and were advised by friends to borrow money for everything. They bought a house on 14th and McDonald (Kitsilano) for $11,000.00. They bought all their furniture on a loan. Same with the car.
My mom died a bit more than a year later and so my dad sold the house for $20,000.00 because it was too painful to live in the same house.
Even though they adopted the new way of doing things, wrapping their brains around the idea of avoiding debt was a big one for them and that idea has stuck with me all my life. I pass it on to my kids today.
I was around 12 at the time and after watching my dad double his money in one year with real estate, it’s one reason I love houses…….probably because of the sense of security a home offers.
Funny how different experiences shapes ones lives.
Introvert, I doubt they can get 2600 for the basement. I know someone in that vicinity who also has newly renovated lower suite, it rents for $1700 (2 bedroom). I say that can get 2200 ish for the three bedroom.
That reno I would guess maybe costs $150K-200K, assuming gutted basement, 2 kitchens, all washrooms, fire places, paint and flooring and maybe landscaping. Maybe GC can provide a better estimate. So assuming that they are probably in it for like $850k if they can get $50k a year NOPI then close to a 6% cap rate while the mortgage is at 2% or lower. So that’s a good return profile with a buffer.
OPPORTUNITY: The Changing Landscape of North Vancouver — https://monova.ca/women-and-wartime-opportunity/
Housing was provided for war effort workers during the war.
Correction: 90% of Japanese-Canadian were sent to interment camps or approximately 22,000 people.
Any good books on this period that you would recommend?
Wowzers.
Seems like many of the ads back then mentioned peculiarities of financing. How much down, that financing was available on easy terms, or vendor take back, rent to own, etc. Took some time for people to really standardize on taking out their own mortgages, maybe there was other factors at work making financing hard to secure.
Update on this house (https://househuntvictoria.ca/2020/07/27/airbnb-declines-but-slowly/#comment-72312)…
Looks like the bottom floor has now been completely gutted and turned into a 3-bedroom. They maybe ran out of tile for one of the bedrooms? And the hot water tank right beside the walk-in shower is classy.
https://www.usedvictoria.com/classified-ad/-3-Bedroom-Suite—Located-in-Gordon-Head_37007151
They’re asking $2600 for the basement, and who knows if they were able to get $3100 for the top floor, but that’s $5700 a month ($68K a year) income on a place that cost $670K + cost of renos.
https://en.wikipedia.org/wiki/Victoria,_British_Columbia
Where did you find the population numbers that far back?
What makes you think that? My understanding was that 25 year mortgages were generally available with 20% down at that time under the National Housing Act of 1938. Post war there was a housing shortage as veterans returned and the government then focused on building more rental homes that were then privatized.
I disagree.
Men left to fight the war therefor there were a population drop in the West Coast.
Immigration came to almost a stop and the Exclusion Act bar Chinese from immigrating into Canada, or attained citizenship after the Head Tax, that make it almost impossible for Chinese-Canadian to buy real estate. And, some province/s strip Chinese-Canadian of their citizenship status if they had one when they traveled out of the province.
90% of the 22,000 Japanese-Canadian lost their home and all assets were auctioned off for pennies on the dollar to pay for the internment camps in BC. Partially increased supply with cheap assets.
Men moved from the East to the West to help with war effort increased demand after the war, because they stayed instead of moved back to the East.
Men moved back from the war exacerbated demand, because all effort were put toward the war instead of local construction and economy.
Non WASP from the EU immigration exploded after the war is another factor that add to the post war housing demand.
Japanese Internment: British Columbia wages war against Japanese Canadians — https://www.cbc.ca/history/EPISCONTENTSE1EP14CH3PA3LE.html
150 years of immigration in Canad — https://www150.statcan.gc.ca/n1/en/pub/11-630-x/11-630-x2016006-eng.pdf?st=INbo5WRn
What matters from an investment perspective is rent net of taxes. You’re getting $191 net which is a yield of 13%.
Inflation adjusted those taxes would be $1853 today. So it’s not that taxes were high back then, it’s just that house prices were severely depressed. Rents pretty low too, but keep in mind during WWII there were strict rent controls.
I have read that in the 1930’s you could buy a house in Vancouver for 3x annual rent. This one was 5x so prices had picked up a bit. 🙂
Disagree. Hardly any housing had been built since the crash of 1929. There was in fact a looming shortage of housing, which was masked by the lack of family formation during the Depression and WWII. Once the soldiers came home there was a huge housing crisis.
Housing was cheap because even those who wanted to buy couldn’t get financing.
I did read a few articles on this scenario the last few months (I will see if I can dig them up). By all accounts it appears that Canadians have used the pandemic to either increase savings or pay down consumer debt. For those with mortgages/Helocs that were pushing into danger zones, most of them just took the penalty and re-financed at much improved rates and re-organized their debt letting a lot of pressure off (even if in deferral or layoff). Looks right now that the pandemic saved a lot people that were previously on the financial edge.
I know from myself, I have added about 18k in additional disposable cash to savings (without planning or effort) over previous years by just the change in my activities during the pandemic (not sure I will ever fully go back to my traditional discretionary spending pattern).
The only concern I really see is with the debt load on the mortgages right now at such artificially low rates is on the 3 to 5 year cycle. Separate from the BoC rate, mortgage renewals and debt financing will be rates 2 to 3 times higher than today. Which might cause some problems for the heavy borrows that don’t factor in future debt servicing costs when they borrow today at a peak asset price points.
Low demand because of excess supply. BC population in 1941 were 817,861, and greater Victoria population were 42,907. I think it would be difficult for Vic/Van housing price to attained today price if we still have the same population of the 40s for such a vast amount of land. Just look at NB presently with similar population size as BC in 1941, and you can find SFH at less than $200K, and some perfectly livable SFH on 1/2 ac with heatpump for less than $50K.
1940 gold were $34.60 USD, and today it is $1835.40.
It’s the same all over the island- severe shortage of single family listings. My daughter is looking for a house anywhere between Parksville/ Qualicum and Duncan under $600,000. A listing came up at $535,000 in Nanaimo and within a day there were showings booked every hour for two days. It went for $82,000 over list (not to her)
Leo, thank you so much for all the Leaf info. Much appreciated.
What’s driving this is mainly economics. Learning how inexpensive a Leaf would be to operate vs. our current older Toyota, I’m having trouble justifying burning an extra ~$3,000 every year for the privilege of owning an ICE car.
Because the end to our mortgage is in sight (<5 years) we're feeling motivated to press even harder as we near the finish line.
Once we don't have any payments, we'll be able to save up to buy a Tesla in cash in relatively short order. A Model Y would be sweet! It might even be cheaper in a few years than it is today.
We're thinking that a Leaf could be a great car to "bridge" us to a future Tesla. Of course, we also like the environmental benefit of driving an EV — you guys are well aware of my contempt for the fossil fuel industry.
Not blaming construction at all. Just looking at the results. Developers were just as taken aback by the sudden resurgence of demand as everyone else.
That’s a bit of a clickbait title… can we blame construction? What about the developers, the city, etc… There has been very few projects coming down the pipeline at the moment.
Does anyone have recent stats on HELOC use over the last year. Wondering if there is any correlation between job losses, lower interest rates, higher property proces and increases HELOC borrowing.
Either new HELOC applications, or use of existing HELOCS.
Another thoughtful and very helpful analysis. Thanks for all the hard work.