‘Perfect storm’ forming in South Island housing market

New report suggests prices for the South Island’s housing market, for renters and owners, are set to increase in 12 to 18 months

Multiple factors are colliding to create pent-up demand for housing on the South Island

If you’ve been thinking about moving into another home but have put it off due to the recent housing spike, you may want to re-think that decision and act while you still can.

Prices for the South Island’s already intense housing market, for renters and owners, are set to go up in 12 to 18 months, according to a new report from The Real Estate Investment Network.

The third-party real estate analyst agency released the report on Greater Victoria last week, marking it as a sustainable investment market that’s poised to outperform many other non-Metro-Vancouver real estate markets in B.C.

Victoria’s extremely low vacancy rate of 0.6 per cent is forecast to remain low through 2017 and beyond.

It’s the start of a long-term trend that will see demand completely outstrip supply in Greater Victoria, with prices that will continue to rise unless action is taken.

“There are too many factors, all putting a demand on densification (that isn’t here),” said Don Campbell, a senior analyst with REIN.

“Put that on top of the already-occurring trend of moving to the South Island, and it’s a perfect storm forming.”

He said Greater Victoria needs to keep talking density, including easier secondary suite approvals, laneway cottages and detached suites, or it’s going to see a potentially out-of-control increase in street rents (prices for available suites).

Vancouver’s much-ballyhooed foreign buyers tax does in fact shift demand to Greater Victoria. However, it’s only one of many factors causing the upward movement of property demand and values, the REIN study found.

“A few offshore buyers will consider Victoria, and you’ve always had people moving here from the Prairies, that’s not changing,” Campbell said.

The pressure comes from the 27 per cent of Canadians who are baby boomers, heading into retirement, and considering a move to the South Island.

At the same time, 27 per cent of the population are 20 to 29-year-old millennials, half of whom still live in their parents’ houses. They’re ready to enter the market.

The University of Victoria also brings in a great deal of renters, as 74 per cent of its 20,000 students come in from out of town.

UVic has also done a better job of keeping grads here with a startup industry.

“That’s a big dam of pent-up demand for housing and rentals in the next five years, it’s the highest pent-up demand we’ve ever seen,” Campbell said.

Making Greater Victoria attractive is new jobs and diversification of job sectors, including an increasing technology sector, with 880 tech companies creating 15,000 direct jobs.

REIN also looked at Saanich’s controversial environmental development permit area bylaw. Campbell’s consensus is that, even with restrictions on the development of EDPA properties, they’ll end up increasing in value anyways.

“Anytime you have a restriction on densification, you’ll have an imbalance, and in Saanich in 12 to 18 months there will be a real imbalance,” Campbell said. “That’ll exist until there’s more stock available for people to move to.”

 

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