Posted by: Daryl & Wendy Ashby | January 4, 2010

Market Change Over Past 8 Years.

Have you ever questioned the financial benefit to purchasing property.
 
The following summary shows the sales within each District for the year as a whole and the average sale value each year in comparison to a point in time eight years later.
 
_________________
 
Sales and Averages for the Year 2000 by District  
 
  1. Victoria / Victoria West – 474 sales for an average of $231,735
  2. Oak Bay – 242 sales for an average of $368,878
  3. Esquimalt – 137 for an average of $200,496
  4. View Royal – 69 for an average of $234,107 
  5. Saanich East – 745 for an average of $280,916 
  6. Saanich West – 339 for an average of $219,146
  7. Central Saanich – 184 for an average of $271,987
  8. North Saanich – 154 for an average of $356,698
  9. Sidney – 144 sales for an average of $187,635
  10. Highlands – 14 sales for an average of $234,036
  11. Colwood – 185 sales for an average of $199,778
  12. Langford – 263 sales for an average of $198,698
  13. Metchosin – 54 sales for an average of $322,433
  14. Sooke – 216 sales for an average of $191,190

Totals – 3220 Sales for an overall average of $251,398 

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 Sales and Averages for the Year 2008 by District 

  1. Victoria / Victoria West – 467 sales for an average of $569,805
  2. Oak Bay – 202 sales for an average of $875,745
  3. Esquimalt – 128 sales for an average of $484,146 
  4. View Royal – 103 sales for an average of $557,785
  5. Saanich East – 703 sales for an average of $646,773
  6. Saanich West – 408 sales for an average of $539,499
  7. Central Saanich – 152 sales for an average of $625,240
  8. North Saanich – 115 sales for an average of $762,542
  9. Sidney – 115 sales for an average of $548,383
  10. Highlands – 25 sales for an average of $592,856
  11. Colwood – 191 sales for an average of $509,297
  12. Langford – 444 sales for an average of $502,995
  13. Metchosin – 32 for an average of $632,819
  14. Sooke – 270 for an average of $443,064

Totals 3355 sales with an overall average of $583,701

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Let’s see if I can summarize the preceding for you.

During the eight year period, homeowner equity within Greater Victoria increased on the average of 132%. This went from a low for Metchosin of 96% (still respectable) to a high in Sidney of 192%.

On the overall no District saw a dramatic increase in the volume of sales, save Langford (by 69%), nor did any District see a dramatic downturn in the number of sales, demonstrating the continued stability of the market as a whole.

Now consider the results of any other investment over the same eight year period. Investment Certificates and Banks averaged 4% per annum, while the stock market proved itself a dangerous arena in which to play for even the most sophisticated investor.

Think now of those who purchased an investment property in 2000 using 100% bank money. A five-year mortgage could be had for 6.5%. Based on the average home costing $251,398, an average $200 per month for taxes, would have been $1884 per month.

Rents in 2000 for an average 1970’s bungalow should have covered the mortgage, meaning the investor had no costs other than general upkeep and incidentals. You may also say he had no profit each month, which may have been true in some cases, BUT.

That same investor made a minimum of $332,000 (132%) on the banks money over the eight year period, with minimal financial input of his own.

I say a minimum of 132% because during that eight year period, the tenants were paying his mortgage down, further increasing his equity.

What do you think:

Is investing in real estate a good idea over the long term?

Does this recent downturn in market values equate to an opportunity to purchase low?

Where do you feel values will be in another 8 to 10 years?

Keep in mind the following. My personal homes cost my wife and I:

1969 – $16,400 (sold for $19,600 in 1970)

1970 – $17,800 (sold for $21,300 in 1973)

1973 – $73,600 (sold for $284,500 in 1989)

1989 – $294,000 (sold at the low of the market in 1994 for $320,000)

1994 – $298,000 (the current value of my home is roughly $650,000.)

Those who insist on being renters fall further and further behind in their ability to enter the market. I believe we are currently sitting at the threshold where first time buyers will soon become non-existant.

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