Don’t know what to buy?

A lot of people are looking to buy a home, but they’re not sure what’s out there or what they can afford. If you’re one of those people, this blog post is for you!

It’s no secret that the process of buying a home can be long and complicated.

My goal is to educate you, and save you time, by giving you the data you need. So you can start looking in the right areas, at the right price.

We’re going to do a backward looking exercise with you. So you can spend this time upfront, save months off your home searching process. Understand the compromises you need to make.

Help you strategize and understand what levers you can pull so that your criteria can work for you, so we can help you reach your goals.

Dustin Miller at 8X knows all the ins and outs of the market, and I’ll work tirelessly to find you the perfect home. Contact me today to get started!

The post Don’t know what to buy? appeared first on Victoria Real Estate Agent.

Why you should choose to live in Fairfield

Residents enjoy the most green space and tree canopy out of any neighbourhood in Victoria, BC.

Victoria residents are lucky to live in such a beautiful city. With its abundance of green space and tree canopy, it’s no wonder that Victoria was recently named the most livable city in Canada. The tree canopy provides essential shade and coverage, helping to keep the city cooler in summer and protecting against the harsh winter winds. In addition, the tree canopy helps to filter out pollution and improve air quality. And with so much green space, there’s always somewhere to enjoy a leisurely walk or picnic with friends. So if you’re looking for a place to call home, be sure to consider Victoria – you won’t be disappointed!

quaint residential streets, stunning waterfront pathways, and hip and trendy shops and restaurants.

Victoria is a beautiful city with a lot to offer visitors and residents alike. From the Dallas Road walkway with its stunning views of the Juan de Fuca straight to the hip and trendy shops and restaurants of Cook Street Village, there is something for everyone in Victoria. Beacon Hill Park is another great spot to enjoy a sunny day, and the Dallas Road walkway is perfect for a leisurely stroll, walking the dog off-leash, or an afternoon jog. No matter what your interests are, you’ll find plenty to enjoy in Victoria.

Today’s Fairfield exemplifies the development of ‘suburban’ Victoria BC and the creation of aspects of a classic British colony.

Fairfield is one of Victoria’s most desirable neighbourhoods, and it’s easy to see why. The neighbourhood is rich with history, and the homes are just as beautiful as they were when they were first built. The Italianate, Victorian, and Edwardian homes are some of the most stunning examples of architecture on the west coast, and the California and Craftsman bungalows are equally impressive. Fairfield architecture and tree-lined cherry blossom streets are the best of what Victoria has to offer. Whether you’re looking for a quiet place to raise a family or an exciting place to retire, Fairfield is the perfect neighbourhood for you.

It’s close to Downtown Victoria, BC and is very walkable

When it comes to finding the perfect place to live, there are a lot of factors to consider. But if you’re looking for a location that is both close to downtown and highly walkable, then Fairfield is the place for you. Located only 5-10 kilometres from Downtown Victoria. And once you’re downtown everything is within walking distance. Whether you want to explore the city’s vibrant arts scene or simply take a stroll through one of the many beautiful streets, Victoria is the perfect place to do it. And if you’re looking for something a little further away, there’s no need to worry. Victoria is also home to an extensive network of bike options, making it easy to get around. So if you’re looking for a place that has it all, look no further than Fairfield.

Fairfield Overview

If you’re looking for an excellent neighbourhood to raise your family, Fairfield is the place for you. With more green space and tree canopy than any other neighbourhood in Victoria, BC, your children will have plenty of room to run and play. The schools in the area are also top-notch, so you can rest assured that your kids will get a great education. And if safety is a priority for you, Fairfield is one of the safest neighbourhoods around. Plus, with lots of great shops and restaurants, you’ll never be bored. Best of all, compared to other areas like Oak Bay, housing prices in Fairfield are much more reasonable. So don’t wait – find your home in Fairfield today. Call 8X Real Estate to view properties in the area.

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Is it a good time to buy a home in a declining market?

You’ve done your research. You know what you can afford and you’ve been scouring listings for months, but you just can’t find the perfect home. You’re getting frustrated and you’re starting to wonder if maybe you should wait until the market improves. After all, isn’t it a bad idea to buy a home in a declining market?

The answer is maybe. It depends on your individual circumstances. If you’re in a position to buy now, there are some advantages to doing so.

Advantages to buying in a declining market

  1. Lower Prices. The most obvious advantage of buying in a declining market is that prices are lower than they were previously. This means that you’ll be able to get more home for your money. Prices have fallen as much as 20% in some segments of the market such as single family detached between $1.2 and $1.5M.
  2. More negotiation power. In a buyers’ market, sellers are more likely to be open to negotiation because they know that there are fewer buyers competing for their home. This gives you more bargaining power when it comes to price and terms.
  3. More inventory to choose from. Because there are more homes on the market in a buyers’ market, you’ll have more options to choose from. This means that you’re more likely to find the perfect home at the right price.
  4. More flexible sellers. Like we said before, sellers in a buyers’ market are often more willing to negotiate on price and terms. They may also be more flexible on things like closing date and repairs that need to be made before closing.
  5. Interest rates are still low. Mortgage interest rates have been rising slowly over the past few years but they’re still relatively low compared to historical norms. A 4.00 to 5.00% rate is still historically pretty attractive. This means that now is still a good time to lock in a low rate on your mortgage.
  6. It’s a good time to invest. If you’re looking at buying as an investment, then a declining market may actually be a good thing for you. That’s because when prices start to rebound, your investment will go up in value faster than if you had bought during an upswing in the market.
  7. You may be able to get government assistance. If you’re a first-time homebuyer, you may be eligible for government programs and incentives that can help with things like your down payment or closing costs. Check out the Property Transfer Tax exemption, and the Federal Governments first time home-buyer incentive program.
  8. Be greedy when others are fearful. A retreat in housing prices is simply not a very common occurrence on a national scale. This is one of the rare opportunities in our lifetime to buy assets at lower prices. Don’t try to time hitting the bottom, you can’t.

Disadvantages to buying in a declining market

  1. It could take longer to seller your current home.If you need to sell your home before prices rebound, it could take longer than usual since there will be more homes on the market competing for buyers’ attention.
  2. You could end up owing more than the house is worth. If prices continue to rapidly decline after you purchase your home, you could end up owing more on your mortgage than the house is actually worth—a situation known as being “underwater.” This can make it difficult (or even impossible) to sell without taking a loss or being forced into foreclosure if you can’t make your payments.
  3. It could be harder to get financing. In addition to having stricter lending requirements in general, some lenders may be hesitant to lend money for a purchase in a declining market since there’s always the risk that the property could lose value and leave them with no equity.
  4. It could be stressful. Buying any property is stressful but add into the mix the uncertainty of a declining housing market and it’s enough to make anyone break out into sweats.

Ultimately, the best thing to do is to speak with a local real estate agent or finance professional to get their advice based on your individual circumstances before making a decision one way or another.

The post Is it a good time to buy a home in a declining market? appeared first on Victoria Real Estate Agent.

Spring Market Update 2021

It was one of the busiest February on record for Victoria’s real estate market with 836 unconditional and completed sales.

That shatters the previous all-time record which was 780 sales in 1992. Runner-up was 772 sales in 2016.

Record High Prices & Purchasing Activity

We’ll Victoria ignored it’s winter hibernation this year. Real estate buyers were out in droves all winter, and continue to prop up the market to new heights.

Demand is exceptionally strong, which is further confirmed by year over year price growth remains well above historic averages.

The average price for a single family detached home remains at $1,221,000 – which is remarkably higher than the $912,000 average price in February of 2020 (pre covid). The single family home market breezed past the 1 million mark in June of 2020, and hasn’t slowed down. Prices will sustain themselves because there are fewer than 400 single family homes available across the entire system. In a typical year we will see the most amount of inventory go online in April and May, but if the current trend continues, we will see only around half of the number of new listings compared to what was normally seen in the past.

The average prices have been propped up by a strong luxury market. February saw 30 homes sell for over $2M – with 12 of those going for at or above asking price. One luxury equestrian estate was listed at $6M and still sold for $155k over asking. There were even 3 condos sales for over $2M – one of which was the penthouse at Hudson Place One – the tallest building in Victoria.

Condominium prices hit an average of $535,500 this month, inching up from the slowly from the $524,000 average price last year. There are approx. 437 active condominium listings across the region, which is also far below our 10 year average. That means there is less than 2 month of inventory. On the Westshore, condo’s are selling within the first week on market, and in the Victoria core area they are selling within 2 – 3 weeks, a little bit slower.

There were approx. 350 new condo listings that came online this month, but the majority of them got absorbed by this insatiable marketplace. It is interesting to note that the newly completed Yates on Yates building has 14 active listings, but not one of them has sold in the past 2 months.

So here’s what you expect in today’s market.

  • Mob like numbers of people showing up and scheduling tours of new listings.
  • Multiple offer situations on nearly all properties, regardless of price point.
  • Bully offers being submitted within hours of the property being listed
  • Non-refundable earnest monies made directly available to Sellers.
  • Waiving all buyer protection contingencies.
  • Buyer’s making up the difference in the inevitable low appraisal situations.

If you’re a Seller – it’s the perfect time to take advantage of the heavily depleted market.

If you’re a buyer – you don’t want to miss the super low interest rates.

The post Spring Market Update 2021 appeared first on Victoria Real Estate Agent.

How to Write Competitive Offers in a Hot Real Estate Market

Aerial image of the Oak Bay Beach Hotel and beautiful Oak Bay coastline.

Victoria is amidst a severe supply shortage in the single-family home market. Listings are down nearly 30% and demand is way up when compared to the same period last year.

The real estate board recently stated, “This represents the lowest inventory of active listings at month-end in at least the last 25 years”.

It is currently commonplace to see bidding wars and sales well over the asking price.

In this market, every detail in your offer makes an impact on whether it is accepted. Here are three tips to ensure your offer is as strong as possible:

  1. Submit an unconditional offer – sellers will often accept unconditional offers over conditional offers even if the sale price is 3-5% less.
  2. Give the sellers their EXACT preferred closing dates – making the transaction convenient for the seller makes them more likely to accept your offer.
  3. Shorten the subject period – 8-10 business days is the typical length for a subject period but reducing this to 4-5 days will make your offer stand out.

In the current market, being quick to act is crucial. The average number of days on the market has reduced significantly in January 2021 as buyers get a head-start on the spring homebuying season. This demand is fueled by rock-bottom interest rates and a preference for single-family homes triggered by COVID.

in the table below, you’ll notice there are significantly more sold than pending properties – this is due to seasonality as January is not a popular month to move homes.

Sales and pending prices above the asking price are becoming more common. You can see the homes most recently listed are often selling for above their asking price. This indicates that the market is heating up in anticipation of a strong spring home-buyers season.

Oak Bay January 2021 Sold & Pending Listings (Single-family)

wdt_ID Status Address Price List Price Sold List vs. Sold Beds Baths SqFt Fin Total Year Built (Est) Lot Size SqFt Date Listed Days On Market
1 P 591 Island Rd 3,600,000 3,850,000 250,000 4 3 3,193 1986 16,900 2021-01-28 0
2 P 3275 Ripon Rd 2,100,000 2,190,000 90,000 3 4 2,865 1957 23,925 2021-01-18 1
3 P 3466 Plymouth Rd 1,249,000 1,215,000 -34,000 3 2 1,640 1959 14,649 2021-01-15 14
4 P 836 Monterey Ave 999,000 1,065,000 66,000 3 1 1,268 1935 5,472 2021-01-15 4
5 P 3300 Exeter Rd 2,380,000 2,250,000 -130,000 5 5 4,429 1957 20,398 2021-01-14 9
6 P 2161 Beaverbrooke St 1,350,000 1,310,000 -40,000 3 4 1,933 2016 3,049 2021-01-08 11
7 P 2776 Thompson Ave 1,295,000 1,350,000 55,000 5 3 2,305 1936 6,850 2021-01-06 12
8 P 2545 Beach Dr 1,399,000 1,611,000 212,000 4 3 2,994 1988 7,500 2021-01-04 4
9 P 117 Barkley Terr 2,359,000 2,320,000 -39,000 3 4 3,666 1962 11,665 2021-01-03 18
10 P 1552 Clive Dr 2,150,000 2,050,000 -100,000 4 4 2,824 1948 5,000 2021-01-01 25

If you’d like help navigating and capitalizing on the current real estate market, please don’t hesitate to reach out.

Dustin Miller is an advocate for transparent real estate data and prides himself on having Vancouver Island’s most popular sold home database on the internet. If you’d like to search for recently sold home prices in your neighbourhood, use our interactive map feature.

The post How to Write Competitive Offers in a Hot Real Estate Market appeared first on Victoria Real Estate Agent.

Oak Bay seeks to finalize regulations on secondary suites

At last Monday’s (Jan 11) council meeting, Urban Systems presented the council with a draft strategy on policy options for secondary suites in Oak Bay. The draft strategy proposed a spectrum of options with variables such as parking requirements, permissible zoning, minimum lot sizes, and owner-occupancy requirements.

Unlike the recent news in Saanich, secondary suites in the form of garden or laneway homes are not being considered. Suites must be limited to the existing footprint of the house in these proposed legislation options.

The Secondary Suites Study was initiated as part of a larger housing framework program. It is supported by policy provisions within the Official Community Plan (OCP) to permit secondary suites within the community. 

The five-phased study commenced nearly four years ago in 2018 – reflecting how slow the region’s municipalities are to address the current housing issues. Oak Bay is currently in Phase Four with Phase Five: The Final Adoption Strategy anticipated to occur in March 2021 at a public council meeting.

Urban Systems studied other BC municipalities that have recently introduced secondary suite bylaws. From these case studies, they proposed six scenarios ranging from least restrictive to most restrictive. The least restrictive option (Scenario A) suggests that secondary suites should be allowed of any size, in any single-family home, and with no registration required. At the other end of the spectrum, Scenario F suggests required rezoning, additional parking requirements, and mandatory business licensing.

Scenario A does not require any additional municipal staff while Scenario F will require up to two more full-time employees.

Oak Bay will likely opt to enact one of the more restrictive of the six scenarios, as suggested from the tone in recent council meetings.

Secondary suites are currently not permitted in the municipality meaning the estimated 500-750 current suites are “unauthorized”. Despite the current lack of legislation, the majority of Oak Bay residents support basement suites. In a study conducted in 2014, 78% supported permitting and regulating secondary suites.

Legalizing in-law suites is one of the most politically popular methods of increasing the housing supply. This form of gentle density does not increase building footprints or change the appearance of a neighbourhood. In-law suites also promote multi-generational households allowing for “aging in place”.

As will all urban planning issues, opponents and the vocal minority are ever-present. Neighbourhood community association, “Oak Bay Watch”, lobbies in opposition to allowing income suites. They cite that “the city will require more revenue to support the population increase” and “the probability of fire is greatly increased”. Concerns about parking and increased property taxes were also raised. Oak Bay has the lowest vacancy rate in the region at 0.2% (Oct 2019). This vacancy rate is a symptom of low rental stock. As of 2018, there were 1080 primary (purpose-built) rental units, and this figure has not changed in several years. The number of rental households in Oak Bay even decreased from 2090 in 2006 to 1830 in 2016.

The full Oak Bay Secondary Suite Study can be read here.

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TOP 10: Victoria Multi-family Investment Sales of 2020 under $1,000,000

In no specific order, we have selected our favourite 2020 multi-family sales under $1,000,000 in Victoria.

2103 Fernwood Road, Victoria

2103 Fernwood is a charming Heritage designated home – now converted to a triplex revenue property. The main house features a 3-Bed unit and a 2-Bed unit. The carriage house to the rear of the property is a 1-Bedroom unit. Furthermore, pride of ownership is evident by the tasteful updates and beautifully kept hard-wood floors.

List: $1,075,000
Sold: $935,000
Days on Market: 32
Date Sold: March 23, 2020

3386/3390 Veteran Street, Saanich

This revenue duplex is on a MASSIVE lot at ¼ of an acre. At 11,055 square feet, there is potential to subdivide and rebuild larger. The lot is also zoned RD-1 meaning the duplex is legally conforming unlike many other revenue properties to appear on the market. 3386/3390 was snapped up quickly for over asking price.

List: $865,000
Sold: $925,000
Days on Market: 8
Date Sold: March 2, 2020

3007 Tillicum Road, Saanich

This side-by-side duplex features a suite in each of the units – a total of 4 units. 3007 Tillicum’s revenue is excellent as each unit is nicely updated and features 2-Bedrooms. Noteably, this property sat on the market for a couple of months but eventually sold for a great price.

List: $1,159,000
Sold: $990,000
Days on Market: 153
Date Sold: May 15, 2020

1735 Kings Road, Victoria

A unique 1910 duplex located in Jubilee features an upper and lower suite. Functionally, the upper unit is a 3-Bed unit while the lower is a 2-Bed unit. The property is also quite large at 7,500 SF. The reasonable price point and unfinished basement create significant potential.

List: $885,000
Sold: $890,000
Days on Market: 18
Date Sold: February 21, 2020

27 San Jose Ave, Victoria

Located in James Bay, 27 San Jose is the most reasonably priced property on this list. It features three 1-Bedroom units on a quaint 4,480 SF lot.

List: $1,098,000
Sold: $760,000
Days on Market: 153
Date Sold: May 15, 2020

1018 Bay Street, Victoria

1018 Bay Street is revenue 4-plex featuring exclusively 1-Bedroom suites. The gross monthly income is $4300. This character home was built in 1912 and sits proudly on a 5,950 square-foot lot.

List: $849,900
Sold: $810,000
Days on Market: 45
Date Sold: August 8, 2020

872 Old Esquimalt Road, Esquimalt

Legal duplex on a 9600 square-foot lot. Excellent proximity to several amenities such as Wholesale Club and many restaurants. Each unit feature 2-Bedrooms and in-suite laundry.

List: $875,000
Sold: $850,000
Days on Market: 7
Date Sold: November 19, 2020

2780,2790 Dean Avenue, Saanich

Boasting 3-Bedrooms per suite in this side-by-side duplex, the location speaks for itself. Additionally, each side also has its own driveway and garage.

List: $1,095,000
Sold: $997,000
Days on Market: 50
Date Sold: June 3, 2020

341, 343 Vancouver Street, Victoria

Excellent location in the heart of Cook Street Village. This legal non-conforming duplex offers an unfinished basement leaving significant upside potential. The units are side-by-side with one being a 1-Bedroom and the other a bachelor suite.

List: $1,095,000
Sold: $980,000
Days on Market: 70
Date Sold: January 8, 2020

601 Toronto Street, Victoria

601 Toronto is a beautiful Queen Anne home built in 1891 and has since been converted to an up/down duplex. The suites offer 10 foot+ ceilings and 2-Bedroom in each unit. Typical for James Bay, the lot is on the smaller side at 2,312 square feet.

List: $985,000
Sold: $960,000
Days on Market: 66
Date Sold: August 31, 2020

Check out other sold multifamily investment listings here. We also publish our annual multi-family report for properties over $1,000,000.

 If you’d like to stay up to date on the market, we can set up a property search tailored to your specific criteria. We believe an open and transparent marketplace benefits everybody.

If you’re looking for someone who’s not your typical REALTOR®, reach out to Dustin. In today’s world, following the status quo just isn’t enough.

The post TOP 10: Victoria Multi-family Investment Sales of 2020 under $1,000,000 appeared first on Victoria Real Estate Agent.

New Industrial Park announced by PC Urban – Colwood BC

PC Urban Properties of Vancouver has submitted a proposal to construct three industrial-commercial buildings on the former Galaxy Motors Colwood property. The site at 1764 Island Highway rests opposite of Juan de Fuca Rec Centre and represents 4.82 acres.

Totaling 135,000 saleable square-feet, the proposed buildings will consist of industrial-commercial uses with office space on the upper floors. Two of the buildings will be 1-storey tall with the largest being 4-storeys.

This sale is the latest in a wave of recent West Shore industrial land sales. The former Galaxy Motors site at 1764 Island Highway traded in December 2020 for $10,500,000 equating to $2,180,000/acre.

Industrial development land is in high demand driven by significant year-over-year industrial lease rates increases. Average industrial lease rates in Victoria are up 15% in 2020 to $15 per square foot. For perspective, Vancouver – another market with a severe supply shortage – averaged $13.12 per square foot.

These buildings will add much-needed supply to the West Shore industrial real estate market. The industrial vacancy rate is historically low at a mere 0.7% – the lowest among capital cities in Western Canada.

Reflective of strong demand, the City of Colwood currently has several more industrial projects in the development pipeline. Other notable projects include a 20-acre industrial park proposed by Omnicron Development and Lotus Capital for the Allandale Lands on Veterans Memorial Parkway.

The push for more industrial real estate in Colwood was facilitated by the adoption of a new Official Community Plan (OCP) in 2018. Among other changes, a zone called “Mixed-Use Employment” was created to foster more jobs in the local area. This initiative aims to surrender Colwood’s reputation as a bedroom-community and broaden its tax base.

8X provides coverage of major Commercial Real Estate transactions in Greater Victoria. Visit our Commercial Real Estate Sales Page for more information on the latest on and off-market deals.

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Depreciation Report Funding Scenarios – Which one did the strata choose?

I often get asked; which of 3 funding scenario did the strata choose?

This question inevitability comes up when working with condo purchasers. They often don’t like what I have to say – none of them.

The depreciation report is a provincially mandated report that does a review of the physical and financial health of the strata corporation. An engineer takes a physical inventory of the common property assets, estimates the remaining life span, and estimates the potential costs of replacement in future dollars.

The engineering firm takes all these costs and builds them into financial projections over the next 30 years. The report talks about the relationship between expenditures and the strata corporations reserve fund.

The report typically categorizes the items into:

  • 1) catch up costs – complete deferred maintenance and renewals
  • 2) keep up costs – costs to complete planned cyclical upkeep maintenance
  • 3) get ahead costs – proactive costs to adapt, upgrade, and improve

The engineers then typically come up three (3) contingency reserve fund cash flow scenarios based on those projected expenditures.

1st scenario – the status quo

is typically the current allocation, the status quo. A scenario where the strata continues with its current level of contributions and maintenance programs. This scenario plays out will happen if the strata opts to not make any changes to its contingency reserve fund program – maintaining the status quo.

2nd scenario – the incremental alternative

The 2nd scenario, is typically the status quo with an incremental annual increase to the contingency fund contribution – keep in mind your monthly strata payment is broken down into two components – the operating fund and the contingency fund.

In this 2nd scenario, the engineer typically picks a rate of 10 – 30% increase in the contingency component (not your total strata fee), so that any near term special levies would be substantially reduced or eliminated.

3rd scenario – the progressive alternative

The 3rd scenario, is typically called the progressive allocation. This is a more aggressive scenario that aims to strike a balance between maintaining a health contingency fund while reducing the potential for over contributing, should some items not require renewal or replacement. This scenario typically has sharp 50-90% increases  in the CRF contribution, and then sharp decreases in the CRF contribution after completion of an anticipated project. It aims to reduce or eliminate special levies while having a health fund.

These projections can sometimes look scary. Large costs like a building envelope renewal, parkade membrane replacement, or window replacement can rack up to tens of millions of dollars for a concrete high rise. Often times, client forget that these costs are simply estimates at inflated future values. A best guess you could say.

I constantly have to remind purchasers, that in reality, these scenarios are not how things play out in the real world. They are just theoretical scenarios, aimed to help guide the strata on what could reasonably be expected in the near term.

Example: $5 million dollar for exterior cladding replacement in 2030

Here’s an example; let’s say a the depreciation report says the exterior cladding needs to be replaced in 2030, and assigns a value of $5 million dollars. This is a large figure, and would result in a big blow to the contingency fund in 2030!

In reality, the strata typically approaches these maintenance items differently. If there is no existing issues stemming from this common building asset, the strata corporation will likely commission the engineer to conduct another report specifically on the exterior envelope. A building envelope condition assessment (BECA). The depreciation report is just a high level overview and guesstimate on the average service life of an asset. It does not analyze the item deeply enough to make informed conclusions on its physical health.

Perhaps the new BECA report will reveal that the cladding system is in excellent condition and will exceed its anticipated service life. In this situation, the BECA report would typically suggest a renewal of the sealant system around the cladding, to ensure it maintains its good condition long into the future. This is a much cheaper preventative maintenance outcome.

Or perhaps, the report will reveal that the cladding system is generally in good condition, but on some areas or exposures of the building the cladding is in rough shape or showing signs of failure. This suggests, that only a portion needs replacement or renewal. The strata can then evaluate if spot replacement, or entire replacement is more effective given the circumstances.

Alternatively, the worst case scenario prevails and the report concludes that the cladding system should indeed be replaced in 8-10 years, just as the depreciation report predicted. In this worst case scenario, there are many strategies the strata corporations can deploy. It can likely will consider increasing its contributions over the next 10 years. It can look to see if a phased approach of replacement over 2-3 years is possible – spreading the cost over time to reduce the burden.

Given the constant rise in new building material technologies the strata corporation can look at other materials and systems that may be more cost effective. For example, grants are offered to do energy retrofit upgrades.

At this point the strata corporation will then start to obtain actual quotes for the work to be done, which may come in lower (or higher) than the $5M figure.

A strata corporation can look to its investment maturities. Many stratas with large amounts of cash in the CRF invest in GICS and bonds. And it can even go as far as financing common property assets. some strata corporations own a caretaker unit which it can borrow against for funding. The strata can even opt to approach a lender to secure a loan and introduce a financing program that would be secured against the stream of income of strata payments (with permission of the owners of course by way of vote).

As you can see, the scenario in the depreciation report, never plays out in reality. The perfect world of financial modelling, just doesn’t reflect what will eventually happen. There are many strategies and options that a strata can choose to deploy to hedge and improve outcomes.

I often like to look back at depreciation report items that have already been replaced. For example, many buildings replace the entire elevator system – not just a refurbishment.

I notice that in many depreciation reports the costs are between $300 – $400k for two elevators. I then look at the financials to see what was spent, and the price is often much less. In my building for example, it came up to $100k less than what was budgeted for. The strata corporation will always budget and ask for more money than it needs at the AGM, so it can get work done should an unanticipated delay or cost arise. The remainder, if any, will be transferred back to the reserve fund.

Another thing that irks me about depreciation report scenarios is the many line items that never get done.  The smaller maintenance items that stratas typically don’t replace unless its causing an issue or is an eyesore. Like driveway resurfacing, exterior lighting, guard rails and hand rails, parking gates, painting of lobby and hallways, etc. All of these costs are layered on in the depreciation report, but they often do not occur in the timeframe the engineer suggests.

The depreciation report is not a bible that dictates that everything mentioned in 2021 needs to be replaced. The strata council and the owners have that authority to choose and plan for what reasonable and preventive work should be done.

Take Depreciation Report Scenarios with a Grain of Salt.

There is no perfect scenario. The best you can do is look at the annual amount of contributions to the CRF. If you see it increasing year to year, it means the strata is progressive and is choosing to smooth out the bumps the best it can.

The predictions of the funding scenario are just that, predictions, best guesses, and theoretical life span scenarios and costs. They are there simply for regulatory compliance and to serve as a guide.

If you’re considering buying or selling in a strata condominium building, I’d welcome the opportunity to work with you. I’m very familiar with many of the top buildings in the region.

The post Depreciation Report Funding Scenarios – Which one did the strata choose? appeared first on Victoria Real Estate Agent.

Impossible to build affordable housing

Why don’t developers build affordable housing?

The most common misguided refrain I hear in debates about housing affordability is the following: 

The problem is that these developers aren’t building any affordable homes, only luxury. They need to build homes that working-class people can afford.

Imagine if we asked the same thing of Ford or Toyota. “You have to sell a brand new Escape for $5,000, because that’s the most many of our working-class customers can afford.” Of course, Ford won’t do that, because the Escape costs more than that to make. 

We don’t as often apply this logic to housing, I suspect, because many people have very little sense of the actual cost of building a house. We know there are cheaper houses in our communities, so we assume new houses could be that cheap if the developer were willing to forgo a bit of profit. In reality, the “used” house is much like a used car—it can be much cheaper than the cost of creating it in the first place, because it’s already there and it is merely changing ownership. The theoretical floor on the price of a “used” home is its land value. The improvements, the structure which we call a house, can depreciate all the way to zero over time.

A new house, however, will never be cheaper than the cost of creating it. Not without some sort of subsidy, since nobody’s going to build at a loss.

First the developer needs to acquire land. In the urban core of Victoria and Saanich, it is increasingly rare to find suitable lots for under $750k.

Then there is construction cost ‘hard costs’ for materials and site servicing, and what we call ‘soft costs’ – the financing costs interests, disbursement fees, broker fees, architect, and the cost of the entitlement process with the municipality. It can take months to get the development permit issued, organize all the professionals needed for demolition and organizing the trades to start on the new build. Then there needs to be a reasonable profit margin to incentivize someone to go through this risky and cash intensive endeavour.

10 years ago, the average price per square foot was around $110 – $120/sqft. By 2017 those figures jumped to $150 – 160ft.Today, even the most experienced builders can only get their costs down to $200 – $220/sqft for an average home in modest neighbourhood.

That means the minimum price for a small new house that is around 1,800sqft is $378,000! And that doesn’t include the land the the developers profit margin. Now you can see why new construction homes, even the modest ones, are so expensive.

In the more desirable high end neighbourhoods like Fairfield and Oak Bay, the typical builder is looking at over $300/sqft because the land acquisition cost is high, and thus the buyers are also expecting higher quality finishing in the higher price range. The developers hard and soft costs often exceed $1M in these areas for these larger 2,500+ sqft homes.

Lumber has increased over 50% in the past year. Labour costs continues to increase. The red tape continues to be layered on by local and provincial governments. There is no good news that prices will fall anytime soon for home builders.

Nobody is going to build at a loss. So there is no reason to expect developers or non-profit orientied groups to be able to deliver affordable housing.

Thanks for watching.

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