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The Real Reasons Home Prices Are Rising in Greater Victoria
When the 2017 Demographia International Housing Affordability Survey was released in January rating 406 cities in nine countries, they rated Victoria as “severely unaffordable”.
The survey considered housing costs in relation to one year of median household income. The statistics were compiled using the third quarter of 2016 and do not consider differences in house sizes. (Demographia defines housing markets as affordable when median prices are less than three times the median household income).
At the time of reporting, Victoria was ranked 381 out of 406 cities, reflecting its rating of 8.1 times the median income of $67,300 required to buy a house with a median cost of $542,400.
Since then, The Multiple Listing Service® Home Price Index benchmark value for a single-family home in the Victoria has risen to $834,200 as of July 2017.
The report said that rapidly escalating house prices in cities around the world are associated geographic containment and wider adoption of urban containment policies. That’s certainly true here; Victoria is hemmed in by water, while Saanich practices urban containment to protect some parts of the municipality from development.
When you combine containment with a demand that has far outstripped supply, prices are guaranteed to rise.
“The activity level in the Victoria real estate market continues to be brisk,” says 2017 Victoria Real Estate Board President Ara Balabanian.
Balabanian describes “low inventory levels, with listings for sale consistently below 2,000… supply is still lower than we expected, which puts pressure on pricing and availability.”
The reason people want to move here is self-evident to those that already do. We receive the least snow, our flowers are the first to bloom, and we enjoy over 2,000 hours of annual sunlight. Combine a fantastic climate, terrific lifestyle, a strong economy, low unemployment, and historically low interest rates… No wonder everyone wants to live here.
Dubbed the “California of Canada”, people across Canada and around the world are noticing Victoria. In a 2015 survey, over fourteen percent of retiring Canadian Boomers surveyed indicated a desire to move here. Victoria ranked as second on a list of the world’s hottest luxury markets in Christie’s International’s 2016 report, and the New York Times and Lonely Planet named our region of Canada as the number one place to visit.
While we can’t bring our home prices beneath three times household median income, we can ensure our homes at Saanich Ridge Estates are within reach of more people who want to live in the abundance and beauty of Saanich. Contact us and find out more about our new “Closer to Life” community and the tools we can employ to help you achieve home ownership.
Five Ways Your New Home Can Make YOU Money
“In reality, an asset is only something that puts money in your pocket. If you have a house that you rent out to tenants, then it’s an asset. If you have a house, paid for or not, that you live in, then it can’t be an asset. Instead of putting money in your pocket, it takes money out of your pocket. That is the simple definition of a liability. This is doubly true if you don’t own your home yet.” Robert Kyosaki
Whether or not you agree with Kyosaki’s assessment of home ownership (we believe homes are definitely an asset), the homes at Saanich Ridge Estates are built to allow you can use it as an asset to generate revenue for your family: Every home comes with an independent, noise proofed suite with its own separate entrance and locked interior access.
How do you use them to generate income? Here are five ideas:
Turn your unused furnished suite into rentable short-term lodging. Airbnb popularized the movement to renting out furnished rooms to travellers. Your clients could include vacationing tourists, people exploring the regional real-estate market, locals who need a place to stay while renovating their own home, or people travelling to and from work.
If you enjoy meeting people and playing host without the commitment of a long-term tenant, then this option is for you!
Alternatively, consider listing your suite or your home’s other rooms on one of many databases that specialize in renting to international students. Make as much as $800 a month, with few additional responsibilities other than providing a meal per day and the option of including the student in activities your family is already doing! Introducing foreign students to your community and way of life can be a very enriching experience for everyone.
If you’re uncomfortable with a perpetual turnover of strange people in your home, perhaps renting out your suite on a monthly basis is an option. Renting out a suite is popular with young families as it enables them to get into a home they otherwise couldn’t afford. It’s also a practical way for seniors on a budget to generate extra living money.
Ensure you do credit and reference checks for all potential tenants. Finding a reliable, long-term tenant can do more than put a dent in your mortgage: you have a built-in neighbour to water your plants when you travel.
If you don’t want other people in your home at all, your unused space is someone else’s treasure. Saanich Ridge Estate homes have plenty of closet space, a large crawlspace, extra rooms, and a garage. Consider renting it out as storage.
If you like action and want to be part of the film industry, list your property on a regional database and you could be discovered as the next desirable hot spot for film shoots. The process requires negotiation with the production company to fit within their budget and what works for you. For instance, you can accept contracts that coincide with your out-of-town holiday, or one where the production company will take over your home and pay for your lodging at a hotel for the duration of the shoot.
These are just a few interesting ideas to make sure your home is an asset for your family… even by Robert Kyosaki’s standards.
Try these great ideas for generating income from your home!
How SKYIRE is Helping More Canadians Attain Home Ownership
The housing sector in Canada is facing more changes soon; changes that will make it much more difficult for millions of people who want to own their own home.
Interest rates increased the first time in seven years. While this tiny change will have little impact on housing demand because it raises monthly payments only a small amount, many economists see this interest rate hike a s a precursor to the central bank’s preamble to move ahead with further rate increases this fall.
Another more far-reaching policy change was also introduced last month when Canada’s banking regulator, the Office of the Superintendent of Financial Institutions (OSFI), unveiled a proposed new rule that will impact many Canadian home buyers.
OSFI said it plans to require home buyers who do not need mortgage insurance – those with down payments greater than 20 per cent of the purchase price – to prove they could still afford their mortgages if interest rates were two percentage points higher than the rate they are offered by their bank.
Uninsured home buyers (those not requiring CMHC because they have a down payment of 20 percent or greater), make up the larger portion of all real estate sales in Canada, and the more stringent stress testing requirement will have a major impact.
If interest rates rise a further 25 basis points – a quarter of a percentage point – to 1 per cent this fall, and if OSFI goes ahead with its proposed change, Canadian Imperial Bank of Commerce economist Benjamin Tal forecasts the rate of growth of new mortgage lending in Canada would drop from roughly 6 per cent annually to about 3 per cent, which means the value of new mortgage lending could fall by up to $40-billion a year from about $80-billion, he said.
If OSFI proceeds with this policy decision, it will take a massive impact and take a significant portion of buyers out of the real estate market.
If this news makes you feel like the deck is getting stacked against you ever being able to own your own home, it’s an understandable reaction. Fortunately, the real estate industry is providing some practical solutions to help you.
Under the SKYIRE name, North American Home Finance Inc., a financing and home mortgage company, offers home buyers and investors exclusive financing options that make real estate ownership attainable, quicker and at less cost. SKYIRE believes home ownership should be a choice, not a privilege, offers and empowers those who want a home and to help them succeed – even in today’s real estate market. Their tagline sums it up “Making HomeOwnership Possible”.
George Lawton, CEO, North American Home Finance Inc. , says SKYIRE is driven to help people achieve home ownership for two very practical reasons.
The first is the size of the market. In Canada and the U.S., 28 percent of people who have work and have an income do not own their own homes. That’s a large market of over 100 million people.
The second, seemingly altruistic reason is very important to everyone at SKYIRE.
“Inflation works against people who don’t have their own home,” says Lawton. “Most don’t really appreciate inflation because it works slowly over time, but if we can have a positive effect on a family by helping them to own a property for the next twenty to thirty years, they will find inflation working in their favour and helping them accumulate an asset base. Upon retirement, that means they could live mortgage free, or their asset’s equity could be turned into an annuity or other financial instrument. The difference is simply getting their name on title vs. continuing to rent.”
“If we can help more people have this positive result, that would be excellent. It drives us forward because when we know others are getting value, when people are really going to benefit, we work harder, and challenges don’t stop us. And ultimately we’re more successful as well.”
SKYIRE’s business model is interesting. It’s based on how real estate is dealt with in the small nation of Singapore. To understand how it works, you first need to know almost all G20 countries have some form of an insurance company that backstop the banks to help them manage short-term deposits so they can provide money for long term mortgages and manage their liquidity issues. Before CMHC, Fanny May or Freddy Mac existed, banks were not the largest lenders for mortgages. Rather, they were among the smallest. Trust companies and insurance companies were the major lenders.
Since the 50s, banks started growing, and they empowered the middle class to enter home ownership which continued to increase until the late 80s. By 2006, many felt the upper limits of home ownership had been reached due to what Lawton refers to as the Nash Equilibrium as detailed in the movie “A Beautiful Mind” starring Russel Crow as Nash. The game theory states an optimal outcome of a game is one where no player has an incentive to deviate from their chosen strategy after considering an opponent’s choice.
In Canada, banks provide the loans, CMHC provides the mortgage insurance, and mostly private housing developers building and selling homes for a profit. Because each sector in Canada is operating out of its own silo, each is trying to maximize profits and this “Nash equilibrium” is where things now stand making it difficult to increase the percentage of home ownership.
Meanwhile, in Singapore – a small country about the size of Greater Victoria, but with a population ten times larger – the Housing Development Board was created in the 60s to control everything in real estate from planning to development to financing. It was a for-profit developer, and a mortgage financing provider, and a mortgage insurer. Singapore combined all three functions under one roof, and by doing that, they could rearrange profit and manage the structures so it was profitable overall, and they could maximize the total number of home owners, which was their ultimate goal.
SKYIER is working to change this three-silo way of doing business. They have formed partnerships to plan, develop and build homes, they are providing novel approaches to accessing home ownership with as little as one percent down through their HomePlan, and they are providing loans through their HomeIndex Mortgages to cover the difference from five of more percent down to twenty percent down, thus helping their customers avoid CMHC default insurance fees and to access better lending rates.
By combining these three real estate sectors, SKYIRE can accomplish three things: They can create a profitable company that will grow, they can offer their services to many more people who feel locked out of home ownership, and they can shift profitability within their business structure to reduce your mortgage interest to make sure your monthly payment is lower.
Everybody wins because SKYIRE’s brand promise is their interest rates will be the lowest of any lender in the country.
In a time when Canada’s policy makers seem hell-bent to move the goal of home ownership out of reach, it’s nice to know innovative realtors and entrepreneurs are stepping up to make the goal more attainable.