Believe it or not, a new report argues that Victoria is about to experience a real estate boom.
“The boom has yet to hit Victoria,” said Jennifer Hunt, vice-president of the Real Estate Investment Network (REIN), a Vancouver-based company that offers education, analysis, and research among other resources to real estate investors. “There is still runway to enter the market.”
Hunt made those comments after the company released a report that surveyed the Top 10 cities in British Columbia for real estate investors, with Victoria finishing fourth behind the leading trio of Surrey, Abbotsford, and New Westminster. Kamloops, Kelowna, Chilliwack, the Tri-Cities, Burnaby, and Vancouver follow Victoria to round out the Top 10.
Drawing on 17 criteria, the report categorizes surveyed cities across three conditions: boom, recovery and slump. Each of those conditions in turn requires different investment techniques during different phases of each cycle. Overall, the report identifies three investment techniques: ‘buy and hold,’ ‘rent to own,’ and ‘fix and flip.’
Vancouver, for example, currently finds itself at the end of a boom on REIN’s real estate cycle clock, a visual representation of this concept. Accordingly, investors should avoid buying and holding properties, because prices have hit a peak.
Victoria, according to the report, finds itself in the “middle to end of [a] recovery.” Accordingly, the report identifies ‘rent to own’ as the ideal investment technique. It also identifies ‘buy and hold’ as a good technique, because prices still have room for upward mobility.
This assessment raises an obvious question: how can Victoria be in recovery, when prices, have been heading in only one direction, namely up. According to House Victoria, a blog tracking local real estate figures, the median price of a detached home in Victoria now approaches $750,000. Four years ago, it was just over $500,000.
Hunt and her co-author Don R. Campbell address this question early in the report when they acknowledge that readers might be surprised to learn that many markets including Victoria find themselves in a ‘recovery’ phase.
“The label of “recovery” doesn’t just mean it is coming out of a slump; it is a technical term describing the combination of the underlying fundamentals and comparing them to how the market could perform in the future,” they write. “Strategic investors understand that the label is not what matters; it is the underlying structure. There’s so much noise built into the statistics in B.C. after such a strong run upwards, it’s hard to believe that the real ‘boom’ statistics haven’t hit yet.”
So what accounts for Victoria’s attractiveness for investors?
First, it has a strong, diverse economy. “According to the most recent data, Victoria surpasses the national median income, and boasts one of the highest median incomes in British Columbia at $89,640 compared to the provincial median income of $79,750,” the report reads. “This, combined with affordability, attracts people from Metro Vancouver and beyond.”
Second, it has a growing population. Greater Victoria’ regional population grew by 6.7 per cent between 2011 and 2016 to 367,770, almost two per cent faster than the national average of five per cent. “And this is the real reason behind the strong housing demand and price increases. Greater Victoria’s population is projected to grow by four to five per cent every five years between 2015 and 2025,” it reads.
The report also points to Victoria’s low rental rates as an incentive for investors.
“In conclusion, a strong rental market, a diverse economy, inherent seat-of-government stability, location, relative affordability, and high median income, are key factors that give Victoria an edge over other top towns and cities in British Columbia,” it reads.