Victoria is in the midst of a housing shortage which has caused prices to sky rockets and vacancy rates to be at an all time low. The CMHC housing outlook report released this fall echo’s what we are feeling in our capital city. Here are the highlights in plain language:
1. More people are moving here.
The CMHC report says we can expect housing demand to continue because of employment gains (i.e. more jobs) and “robust population growth” due to net migration to our capital. Where are all these people coming from?
Victoria has always been a hot destination for folks entering their retirement years. With an ageing baby boomer generation, we’ve seen an increase in the migration of retirees and I suspect we will continue to see an increase in our population as people flock here for the temperate weather.
I have also noticed more people than usual moving here from Alberta. Since the drop in oil prices and subsequent floundering of the oil and gas industry, we have seen many young workers making their way west looking for job opportunities.
2. We have a shortage in homes.
This is very normal when we see an increase in migration to a city. According to the report, “historically low supply levels across the housing market have resulted in competition between growing number of home buyers, driving up prices in 2016”. Developers and builders have been working around the clock to build more housing stock to match the increased demand. The number of housing starts is up above the 10 year average. Naturally there is a lag between builders responding to the market and new home being available to be lived in. The CMHC report makes note that only half of the new builds in our area are single family homes, the rest are multi family dwellings. As the supply of new homes catches up, we should move to a more balanced market.
3. There's nothing to rent!
Vacancy rates are at an all time low. Since there are so many people looking to purchase but not finding the right product, home owners are moving to rentals temporarily. This has pushed the rental rates up and has made it very difficult for students to find appropriate housing this year. There are also many people who move to Victoria, rent for a year or two before deciding where they want to buy. We will start to see more purpose built rental buildings coming to the market as developers respond to the increased demand.
4. When will the madness end?
According to CMHC, they are expecting the market to balance out in 2018. All this means is there will be more homes for sale to meet the increased demand. This doesn't mean prices will drop, they will likely stabilise and remain more consistent month over month. That being said, they are talking in generalities and not getting into the specifics of the many micro-markets within Victoria. For example, if the demand for houses in Oak Bay remains unwavering and the supply of homes doesn't catch up, then prices could continue to increase... although, potentially more slowly.
5. What's the good news?
This is a great time for homeowners and our economy. As the value of homes increase, people are able to leverage their homes to do renovations, or purchase investment properties. A busy housing market is a great economic driver which keeps many industries busy with work. When people are working, they earn and income and hopefully shop local and keep our economy strong!
This is also a good time for first time buyers to get into the market. It's not as easy as it could be, but it's not impossible to find the right home and the right opportunity. So long as the market is increasing, every month you wait to buy may be costing you money. Let's assumed you want to purchase a home for $600,000. Even if the market increases 1% every month for the next year, if you purchase your home next year vs today, it would cost you an extra $72,000. I'm not saying you need to rush into purchasing a home if the timing is not right for you. But if you're waiting for the market to slow down and prices to drop, then I think you're costing yourself a lot of money.