Garden Suites? What problems do they solve? And who benefits from them?
Hello everyone and welcome to Blog #3! Here, I will be covering the July market statistics for the overall housing market as well as going in depth regarding garden suites. We will be discussing if they are a good investment and if they are something that you should consider adding to your own home.
Before we dive in, I want to make another mention to ROAM. This is a local organization that I truly believe in. They are a purely volunteer based organization and their goal is to reunite animals with their owners. I have three pets of my own and if any of them went missing I would be grateful to have a service like ROAM. Be sure to check them out.
Overview: Current Market Statistics
The overall statistics when compared to July 2017 are actually down in total sales by 17.6%. Now that seems like a steep number, but it does not necessarily correlate with value. The average values have increased by 5.5%. It is a very interesting scenario, usually when sales are down prices are down but what’s going on right now is that we have a lot of artificial suppression in our marketplace. We have the government, foreign taxes, mortgage qualification issues, and the speculation tax. All of which is really suppressing buying power particularly in the foreign investors. That is why we are seeing a slowdown in the luxury market… sales for properties listed over $800,000 to $850,000 are starting to slow down.
With regards to the single family dwellings of July 2017 there was a total of 396 sales, and this year we are down 16.5% at 340 total sales. Condominiums had 230 sales for 2017 and we are down 22.6% to 188 total sales. August is typically a slower time in the market but when in unison with the speculation tax, foreign equity tax, and mortgage qualification changes it is inevitable for us to see numbers such as this. It is too early to tell what will happen, but it will be interesting to see what happens this coming September when the market usually starts to pick up again.
There is still a lot of the local presence purchasing the inventory under $750,000. I’m also finding that condos under the $550,000 list price seem to be active. We are heading towards a more buyer favoured market with inventory beginning to stack, but with that being said anything under the $750,000 price point is still quite active. With the stacking in inventory it is now the sellers that must compete by being more realistic with pricing and by having a strong marketing plan.
Garden Suites: Are They a Good Investment?
If you are a homeowner and you are on the fence about whether you should build a garden suite, I want to give you some insight. Not only is it a great benefit and investment strategy, but you are also helping the extreme affordable housing shortage that we are experiencing on the island and throughout BC.
The total construction costs that I have received as offhand knowledge is approximately $100,000-$150,000 all involved. You can build garden suites on most single family homes that are 5,500 square feet and up.
When comparing the garden suite vs. the condo as an investment, the condo typically has a higher price point. You then assume the responsibility of becoming a member of the strata which means you have less flexibility of your unit. This could be rental restrictions, age restrictions, or a change of the bylaws on a moments notice. All of which could seriously affect your overall investment. You can achieve the same rent with a garden suite at a quarter of the cost.
The figures: Let’s look at the garden suite. Cost is approximately $100,000 – again verify with a contractor. Using that number as a ballpark figure, you are getting rent equal to a 1-bedroom condo with a parking spot downtown. No mortgage payment at the least and the cash is 100% yours after you build the suite, other than the line of credit that you may have needed. By adding a garden suite to your home, you are also increasing the value of your property. Now let’s look at the condo. Take the same 100K down payment on a 350K condo, rent is still the same. Mortgage is about 250K at 3.25% on a 5 year fixed term with a 25 year amortization period. That comes out to a monthly payment of $1,215 plus the additional $200 strata fee. Yes, you will have to pay the mortgage every month but as far as a cash flow investment goes, that would be more of a long-term hold. The garden suite is just maintenance cost plus utilities.
- We are increasing the supply of affordable senior housing. There currently exists a major shortage. Even the expensive senior housing is at a shortage and with that they are looking at anywhere from 5 to $10,000 a month just to be able to live in some of these places.
- You’re increasing the overall rental supply for a variety of demographics. The rents and prices have skyrocketed, so allowing for the construction of garden suites will help densify the neighbourhoods allowing more people to live within the city in a more affordable way.
- You’ll be able to house a family member. This may include your teens, parents, or extended family. You will still have your privacy and allow for your family to have affordable housing. This is especially great for parents who need assisted living but still want their own privacy.
- The allowance for subtle density in existing neighbourhoods without damaging the character of the area. Currently with Saanich, they are conducting a survey that goes over these elements. There are a lot of variables to take into account. Privacy, building size, and parking on the streets were some concerns.
- Private mortgage helper to assist with the affordability.
Garden suites are a fantastic opportunity. However, there are quite a few variables to consider and I would suggest contacting a local builder before starting. The garden suite as an investment is definitely a viable option. Currently, Victoria has legalized, and Oak Bay and Saanich are considering it. In addition to making it legal, they want to make it affordable and streamline the approval process.
If you have any questions or suggestions for future content, please do not hesitate to contact me. If you require any general real estate advice or have any questions about the market, I would be delighted to assist you.