The rennie podcast is about the real estate market and the people connected by it. Tune in for monthly discussions making sense of the latest market data.
EPISODE #92: FERRY DIFFERENT MARKETS
Listen (or watch) as Ryan Berlin (Chief Economist and Vice President of Intelligence) and Ryan Wyse (Market Intelligence Manager and Lead Analyst) chat with Victoria-based rennie advisor Chris Gill about the Metro Vancouver and Greater Victoria housing markets, which have moved in different directions this year. They look at August's sales and inventory data and what it means for buyers and sellers in each market, then turn to the macro backdrop, including inflation, the Bank of Canada's next move, and why mortgage rates are rising even as the policy rate holds.
Featured guests:
Ryan Berlin, Chief Economist and Vice President of Intelligence
Ryan Wyse, Lead Analyst and Market Intelligence Manager
Chris Gill, rennie advisor
We’d love to answer your real estate questions. Email us at [email protected] or leave a voicemail, and we’ll try to respond in future episodes.
Transcript
Ryan Wyse: August is slow.
Chris Gill: Those buildings are definitely hurting.
Ryan Berlin: If you're an investor, you're competing against big boys.
Chris Gill: If it works for you now, if you can see yourself living here, do it.
Ryan Berlin: These are the best conditions for buyers that we've seen.
Ryan Wyse: You were never able to walk into a brand new condo and buy one because there was just no completed-
Ryan Berlin: A rate cut is off the table early next year.
Ryan Wyse: Inflation's running a lot hotter in the US than it is here.
Ryan Berlin: The lunatic running the asylum south of the border.
Chris Gill: I saw diesel over 3 bucks when I went for a walk. 304.9. [instrumental music]
Ryan Berlin: Welcome to the rennie podcast. I'm Ryan Berlin, chief economist and vice president of intelligence here at rennie, and as always, joined by Ryan Wyse, market intelligence manager and lead analyst. I got it.
Ryan Wyse: Nailed it.
Ryan Berlin: How you doing?
Ryan Wyse: [laughs] I'm great. How's it going?
Ryan Berlin: Super. We are here with Chris Gill, rennie advisor based in Victoria, husband, father, developer, slo-pitch champion. Almost, almost-
Chris Gill: So close.
Ryan Berlin: You guys were in a slo-pitch tournament yesterday.
Chris Gill: Yes.
Ryan Berlin: And did better than the year before.
Chris Gill: Much better than any other year, yes.
Ryan Berlin: Than any other year?
Chris Gill: Yeah. Oh, yeah.
Ryan Berlin: So what... So, yeah, like, what, was the competition not as good? Did you just... Did you guys coalesce? Like, what happened?
Chris Gill: I- I... You know what? I don't know. It just, it was a... I was not planning on it. I had things booked so that we were 3 and done [laughter], and then we won those 3 games. So I had to... Yeah, it was, and no cell reception at the place, so I had to, like, leave and, yeah, come back, and it was a, it was a big day.
Ryan Berlin: Big day. But you made... You're like the Toronto Blue Jays. Like, out of nowhere, you made it all the way to the end. Lost by a run. Still hurts.
Ryan Wyse: Yeah, still hurts.
Ryan Berlin: Let's talk about the market, the economy, what's going on in Vancouver and in Victoria. On the docket today, we will review the latest MLS data for August for Metro Vancouver and Greater Victoria as we sort of exit the summer lull, although, Chris, you said that you have been very busy, so we'll talk a bit about that. And then we'll parse what is, or what has been, a very noisy macroeconomic backdrop. August is a month when the housing market often takes a vacation, uh, and so, I'm told, does your house, but the data keeps coming in. Um, there are stories to be told. So what are we seeing in Vancouver and Victoria from an initial take of the high-level data? It looks like a bit of a different story in those 2 markets.
Ryan Wyse: Yeah. So, like you said, August is slow. It's, you know, real estate is quite seasonal. So against the backdrop of a typical August, I would say that Vancouver was much more slow and Vic kind of trucking along a little more steadily. So if we just get to the numbers, Vancouver sales of just over 2,700 for the region, that's the Vancouver and Fraser Valley board areas together. That's lower than last year. That's 27% below average. In Victoria, 560 deals. That's more than last year and only 15% below average, so sales much closer to average. On the new listings front, Vancouver, less than last year, below average. Victoria, more than last year, above average, uh, at around 1,000 new listings. So these 2 markets are kind of diverging, especially when it comes to inventory. So we've been talking for months and months in Vancouver about how inventory has tightened a lot, and we're not seeing the same thing in Victoria. So we haven't got that same plateau or that tightening. In fact, inventory is up year over year. It's almost 50% above average, and we're now at the highest August total since 2014, so more than a decade high for inventory. Uh, so, you know, kind of the different themes here: sales a little steadier, a lot more listings, uh, than Vancouver, which is kind of coming off the extremes a little bit more.
Ryan Berlin: I don't know what insights you have into that. I don't know if you want to talk about it or if you can weigh in, but I know Victoria as a market tends to be less volatile than Vancouver. I think part of it is the public sector presence. Like, there is just a built-in stability into that local economy to a greater degree than we have here. But it's interesting that sales are below average here in Metro Vancouver and also in Greater Victoria, but less so there, but then so much more inventory. Like, that's surprising to me. I would have thought that with sales that are closer to normal, that would just sort of chip away at that excess availability.
Chris Gill: Yeah, I think that, you know, it's been pretty busy on the listing side, for sure. Um, a lot of that is condos and things too. Um, so if you break it down into certain segments, I think condos are probably leading the way in listings and not necessarily selling.
Ryan Wyse: So relative to average, townhomes, then condos, then detached.
Chris Gill: Okay. Well, I think partly the townhome side of it would be Victoria is not historically a townhome city-
Ryan Berlin and Ryan Wyse: Yeah, yeah.
Chris Gill: ... so as those have been there, there's more and more being built all the time, right? So I think that's part of it.
Ryan Wyse: Yeah. It's not a small share of the overall market, and it's growing, kind of like multiplex and duplex here is kind of a growing share of the market. It's just following a similar pattern that way. Yeah.
Ryan Berlin: Is there a perception you have in the market, or even just, like, a real observation that you've been able to land on as it relates to condos? Like, is it, is there a size issue? Like, obviously, Victoria is a more affordable market than Vancouver, all else being equal. You know, somebody who's maybe looking in this market in Vancouver can go to Victoria and look for a little bit more size, a little bit more space. Like, I'm just trying to understand, like, why condos, if we ignore townhomes' smaller numbers. But your observation, being in the market, is that, yeah, it seems that, like, there's a lot of, a lot of condo inventory. Like, where does that come from, or who, who are the, who are the homeowners? Who are the sellers?
Chris Gill: Yeah, I think that a lot of the condos for sale... I've been looking. I've got, I've got a few listed right now. One is a 2-bedroom, 2-bath. It's kind of on that more affordable side in terms of, well, it's under 700,000. But then when I look, condos downtown under 700, 2 bed, 2 bath, I think there was 2 sales in the last 2 months.
Ryan Berlin: It's not moving.
Chris Gill: No. So that's part of it.
Ryan Berlin: I'd buy one. Sounds like a good deal. [laughs]
Ryan Wyse: You're always talking about moving to the island.
Ryan Berlin: I am. Yeah. [laughs] Thought you were... I know, you're transitioning.
Chris Gill: Um, but there's a lot of, a lot of one-bedrooms too, right? There's a ton of one-bedrooms, and for a long time, developers were building with that rental mindset, so people buying as investment. And, and now, with everything that's being currently built is rental, um, there's less of those people wanting to rent out the individual, and, and it's just, I mean, yeah, the residential tenancy laws and stuff like that have all changed, so people don't want to be landlords as much anymore. So those are all hitting the market as well.
Ryan Wyse: Was it also some former Airbnbs as well?
Chris Gill: There would be some, for sure.
Ryan Wyse: Um, I guess it's been, like, 2 years now.
Chris Gill: So there's a few buildings, though, that people would buy them strictly for that, and we don't have a ton, right? I mean, I used to have a list, I would say, maybe 15 buildings-
Ryan Berlin: Mm-hmm
Chris Gill: ... that were allowed. You're allowed Airbnbs. So it wasn't anything overwhelming, but those buildings are definitely hurting, and there's definitely listings in there. And one that comes to mind is The Janion, right? That, that was-
Ryan Berlin: Oh, yeah.
Chris Gill: Those are tiny, and that's right by the Johnson Street Bridge.
Ryan Berlin: Oh, yeah.
Chris Gill: Um, those condos are 250, 350 feet. Hard to live there long term.
Ryan Berlin: Yeah, yeah. I mean, that is the issue that we're seeing here too. Um, like, on the listing side, for sure, but as new projects come to market, like, whether it's rental or for-sale strata, is the demand for those smaller units just isn't there, right? And so I think part of it, for sure, is on the investor side. The tenant market is not as deep as it was, and that's happening for, for demographic reasons. But then at the same time, you have this, for lack of a better term, explosion of purpose-built rental supply: professionally managed, security of tenure, you know, often well amenitized. This is not something that BC markets had until recently. And I think people now... You're a renter. Like, I, I think you go back 10 years and people go, like, like, you might know whether, like, you know your landlord, but you're not really differentiating between someone who owns the building versus owns the unit. Like, you're a renter and you have a landlord. Now, I think the perception is changing, and if you're an investor, you're competing against big boys, right? So it's a, it's a different landscape.
Ryan Wyse: The only way to get a new rental was to rent a condo for, oh, 20 years. 20 years.
Chris Gill: Oh, yeah. I mean, the original rental housing stock was '70s, late '70s. Pretty much everything was built then for rental, and since then, the condos penciled, and then they stopped working, and so everyone switched to rental.
Ryan Berlin: Question for you, Chris, just given the bloated inventory right now. I'm curious about the mindset of people who are selling their home right now and what your approach is in communicating where the market's at and maybe what their expectations should be as a seller, because I think we're in this, like, protracted price downturn, right? Like, prices peaked a few years ago now. Um, the last 2 cycles, prices had reached peak by now. And I think early, when prices are down... Just, you know, housing markets are cyclical, so it happens from time to time. But early in that part of the cycle, you can see why homeowners go, "No, no, I know the, I know the value of my home. It's, it's up here, right? I don't care how many prices are here," because it's too recent for them to have adjusted their perception. But I feel like perceptions now are sort of becoming... It's a bit more ubiquitous, the understanding that, yeah, this is a different type of cycle. Are you seeing that?
Chris Gill: Definitely, definitely. Um, it takes a while, and it's time. Sellers may feel it's worth X, and buyers think it's worth Y, and you have to try and get there. Biggest thing is just showing them every month or every 2 weeks, "Hey, this is what's gone on." Like, either it's been nothing, or there's been a sale and it's $50,000 less than what we're at, or $100,000 less. You know, those sorts of things. So using the comparables, if there is any. Single family is a little bit more unique, but you can still look at the bedrooms, bathrooms, and areas and stuff like that, whereas condos, much easier because of the square footage.
Ryan Wyse: And are you finding buyers... Like, I always hear a lot from people that I talk to where, when prices are falling, the buyer mentality is like, "Well, I'm going to wait until prices aren't falling anymore," or, "I want to, like, time this bottom." Or just this, this psychology in a falling price environment of, like, "I want to keep waiting because maybe prices keep falling."
Chris Gill: It's a real thing. It's a real thing. Um, you know, I just remind them, if, if it works for you now, if you can see yourself living here, do it. If you don't, you can wait. But I think if, if you walk into a place and you're like, "This, this is where I want to live," you got to pull the trigger. If not, then, yeah, just hang out on the sidelines and watch-
Ryan Berlin: Like everybody else.
Chris Gill: Yeah. But don't try and time the market.
Ryan Berlin: Yeah, I think that's good advice, and that's, that's definitely a belief that I share. And this morning, I just did a webinar for the Greater Vancouver Realtors and presented an outlook for the strata condo market. And it's really, like, in our view, it's sort of like early 2028 is when we think we can realistically start to get our house in order, where there's the potential for some stability to have been in place for a little while. Maybe a little bit more confidence, you know, re-enters the market. And certainly, we don't think the condo market here will look like 2021, 2022 in a year and a half's time, but I think it starts looking more average or typical, because right now, we're at a real low point in the cycle. Somebody asked a question. They said, "You know, based on your forecast there, uh, 2027's looking a bit soft. Do you recommend waiting and negotiating harder next year?" So my response was just, like, well, yeah, don't time the market. I mean, you have, like, like, right now, compared to, you know, the lifetime of many of you who are, like, participating in this webinar, like, these are the best conditions for buyers that we've seen. And so, yeah, might, might mortgage rates come down? Yeah, but they also might go up.
Ryan Wyse: We'll talk about that in a minute.
Ryan Berlin: Yeah. I mean, what we know right now is that you, as a buyer, you have, like, the least competition you've had in arguably a couple decades, and more, more to choose from-
Ryan Wyse: And resale, new, like, for end-user buyers-
Ryan Berlin: Whatever you want.
Ryan Wyse: ... more so in Metro Vancouver, but there's some in Victoria too, particularly in Langford. You were never able to walk into a brand new condo and buy one because there was just no completed and unsold inventory for decades, and now there is quite a bit across a lot of different communities. You know, we have over 4,000 in Metro Vancouver. There's a few hundred in Greater Victoria, again, mostly in Langford. But that option just wasn't available to you. If you wanted a new condo, you had to buy pre-sale, and now that choice is there for those who want it, those who can afford it.
Chris Gill: Yeah, we, we've been lucky in Victoria. I mean, Victoria is a, if you build it, they will come sort of market. So we haven't really... Besides the Janion, buildings don't typically sell out pre-sale, so there's always some finished inventory to buy at the end. We were fortunate that way, depending on how you want to look at it.
Ryan Berlin: Yeah.
Ryan Wyse: Well, on the flip side, there isn't a huge glut now either, like we're dealing with here. So-
Chris Gill: No, we, we don't have a lot of vacant condos.
Ryan Berlin: So you're saying we can't, we can't fulfill that condo conversion mandate of 2,200 units by just going to Victoria?
Ryan Wyse: No, there's only a few hundred in Victoria. There's even less in Kelowna. Yeah. Um, sorry, about 300-and-something in Kelowna. Uh, you basically... It runs through Burnaby, Coquitlam, Vancouver, Richmond.
Ryan Berlin: Yeah. Is there anything, any stories you want to tell about negotiations or listings, or, like, what you're seeing from a, like, buyer profile or seller profile? Anything like that? Or-
Chris Gill: What I'm seeing is, in the market, there's certain stuff I see listed, I'm like, "Oh, that's a pretty good deal," and then a month later, it's still there. And then other things I'm seeing, and I'm like, "That's overpriced," and it sells. You just... It's, it's a, it's a bit of a head-scratcher in terms of, like, what's going on. Um, but certain stuff, having repped a few buyers lately, the sellers kind of just come back at a bottom line, and quickly. Whereas before, it's you go back and forth, you go back and forth, and you get to a number. Now it's like you write an offer and the seller comes back, "No, this is my bottom line." And I've tested it a couple times after that, and that's their bottom line. I mean, that's-
Ryan Wyse: Yeah, that's good to know. I, this probably makes the process a little easier-
Chris Gill: It does.
Ryan Wyse: ... and, like, if you're being upfront about it, it should make for a fairly straightforward negotiation.
Ryan Berlin: It also says that there's, there's no urgency in those situations.
Chris Gill: Well, Victoria doesn't have a lot of mortgages, right? So there's a lot of homes that are on clear title, and they just have a number that they want, and-
Ryan Berlin: Like, "I'll move if I get this. Otherwise-"
Chris Gill: "Otherwise, I'm just going to hold on to it."
Ryan Berlin: Yeah.
Chris Gill: So-
Ryan Berlin: Makes sense. So I find myself driving through Royal Bay, like, fairly often, given how infrequently I'm in that part of the world. There's a lot going on there, like, a lot of construction, townhomes, condos. And then also on the, is it the south side of the highway, the slope down to the community called Royal Beach. What's happening there, and how active is that market? Like, my perception is that it's a lot of young families, like first homes or move-up homes, uh, smaller families. Like, what, what are you seeing there?
Chris Gill: That's exactly what it is, 'cause all the schools are being built out that way too. So, you know, that's kind of one of the hubs with the amenities and things that are offered in there-
Ryan Berlin: Like such as?
Chris Gill: Well, they've got the grocery stores and everything like that, but they also have the high school and elementary schools going out there, and, and things like that. So it's just easier for the families to kind of stay in their little neighbourhoods, right?
Ryan Berlin: And the price is right-
Chris Gill: The price is-
Ryan Berlin: ... from what I understand.
Chris Gill: The price is a lot more palatable than other, other areas, for sure. The tough thing is the infrastructure and, and getting in and out. There's a bit of traffic, for sure.
Ryan Berlin: For commuters, or just in general right now?
Ryan Wyse: For somebody who lives in Burnaby, I bet the traffic doesn't seem so bad.
Chris Gill: No, not too bad. No, no. Yeah, no. Take that with a grain of salt.
Ryan Berlin: Yeah. I've never seen anything I would complain about there.
Ryan Wyse: The guy who, who drives the Lions Gate Bridge probably doesn't think it's too bad either.
Ryan Berlin: It was lovely. Yeah. No one's ever in a rush. It's great. I always find myself at, uh, My-Chosen Café.
Chris Gill: Oh, there you go. Oh, wow.
Ryan Berlin: Love that place. It's great. It's my kind of... That's my kind of joint.
Chris Gill: What, what brings you out that way?
Ryan Berlin: My-Chosen Café. [laughs]
Ryan Wyse: I'm sorry, do we have a new sponsor?
Ryan Berlin: No. So every, every year, my wife and I go to, um... Well, I don't want to tell people. It's going to get busier.
Ryan Wyse: That place near Sooke.
Ryan Berlin: Point No Point. You know Point No Point? So we, for the last 10 years, we go once a year, and we... The phones are generally off because they don't generally work, and then there's no TV, and we read and we talk. We actually talk. So anyway, when we're in that part, you know, we'll come back through and explore a little bit. And, um, yeah, every time we come through, there's, there's more activity, like, in, in Colwood, at Royal Bay, Royal Beach.
Chris Gill: Olympic View has a bunch of stuff.
Ryan Berlin: Yeah, Olympic View. You have property-
Ryan Wyse: Some lots.
Chris Gill: Yeah, just, just one or two. Yeah. No, we've got some-
Ryan Berlin: What are you trying to do with them?
Chris Gill: Like, single family. There's multifamily and, and townhome sites as well.
Ryan Berlin: And who are you selling to?
Chris Gill: Mostly end users building custom homes, and, and smaller builders.
Ryan Berlin: So parcel by parcel.
Chris Gill: It's a great area. It, you're kind of in nature, so it's not like Royal Bay, where it's all homes stacked. They're much larger lots, and you're surrounded in trees and ponds, and you're right by a golf course. So not bad.
Ryan Berlin: Good sell.
Ryan Wyse: Yeah, that's-
Chris Gill: Oh, sorry-
Ryan Berlin: No, you can do that-
Chris Gill: ... here to sell.
Ryan Berlin: Yeah. No, no, no. At the end of the episode-
Ryan Wyse: You say golf course and I'm interested.
Ryan Berlin: Yeah, yeah, you are. Um, you'll share your contact details at the end if you want to, so if people want to follow up on that or anything else. Let's, let's look a little bit bigger picture here: some of the forces that are, in some senses, external to the housing market but that impact it, and, and in some ways feel like a bit of a sort of... holding the market hostage a little bit. I know. I like that term, don't I?
Ryan Wyse: You do.
Ryan Berlin: I haven't used it in a-
Ryan Wyse: I think it's, it's fair. Like, we've been in, you know, almost 2 years of just a lot of external noise.
Ryan Berlin: Can we go now? Can we go now? Yeah. It's, it's the macroeconomy. It's the geopolitics, right? And it's stuff that we read about that isn't happening in the market but has direct implications for it. I know there's a few things that you wanted to touch on. There's some new data out, uh, so let's talk about that, and then we'll talk about what lies ahead.
Ryan Wyse: Sure. So let's start with inflation. So we got August Canadian inflation data out this week, and, honestly, not a lot new there, which I would say is a good thing. So headline inflation at 3% for August, which is the same as July. The Bank of Canada's preferred core measures, so CPI-trim, CPI-median, at 1.9%, 2%, so right around target. Inflation of everything excluding gas, 2.4%, so a little bit higher, but not too much. So I think the story that we've told before still holds up, which is inflation is moving up because of high oil and gas prices for all the reasons that we know, but the high oil and gas prices have not made goods generally more expensive. So, you know, it's more expensive to move things around now, but that hasn't bled in across the CPI. And so the Bank of Canada will not act just based... They say they will look through this oil shock and these current high oil and gas prices as long as we don't see broad-based inflation increases, which we haven't yet. So their next announcement is October 28th. We get more inflation data between now and then. We get more jobs data. We will get threats of many more tariffs and a whole bunch of other stuff happen between now and then. But based on what we know today, there's no reason for the Bank of Canada to change its policy rate. There's still, I think, more risk out there, and I think we're trending more towards the next movement being a hike, whereas earlier this year, we would have said a cut. But I don't think they're moving in October, and I don't think they're moving this year. But I think 2027, there's more risk of increases, for sure.
Ryan Berlin: Yeah. And, I mean, we said at the beginning of the year, our forecast, pretty boring forecast, but we just said the bank's going to hold all year. So we're 10 months in, and that's been the case. And, and, and yeah, I don't think there's any new information, really, that can come in at the October meeting or the early December meeting that will push them to a rate change. But I think a rate cut is off the table early next year. Like, if anybody's waiting for a rate cut right now, you're going to be waiting a long time, and it might be a rate cut in the future after we've had a few hikes.
Ryan Wyse: Yeah.
Ryan Berlin: Um, I think rolling into next year, it's just a matter of whether they hold or increase it. And, and to your point, it's like, is the inflationary pressure that we're seeing now, does it permeate across sectors and across products, the things that we spend our money on, um, across the board? So we'll see. I mean, do you, do you leave the, the interest rate conversations with the mortgage broker and your client? Or, like, when you're talking to, like, on the buy or sell side, are people sort of up on the Bank of Canada's thinking, decision-making, when the next meeting is? Like, how plugged in are your clients on that, or is it not really relevant?
Chris Gill: When it was fluctuating, it was relevant, but this year, no. Leave it for the mortgage broker, or if they do want to talk more about it, I just tell them what you guys tell me. So it's basically it. Yeah, it, it's definitely not as top of mind and worrisome as, as it was when it was more volatile and things were... They're just waiting for the next meeting for the rates to go up, right?
Ryan Wyse: That was the only time in my career that the general public paid attention to the Bank of Canada.
Chris Gill: Yeah.
Ryan Wyse: Was, like, 2022, 2023.
Ryan Berlin: Yeah. I mean, it was, I'm, I was... Yeah, I'm so happy we're not doing that. It wasn't just, like, a month-to-month thing. It was, like, a day-to-day, week-to-week thing. Like, so much information coming in all the time. What does this mean? How do we synthesize it with what we already know? So, yeah, no, a lot more stability right now. But, you know, the stability is on the policy rate side, not in bond yields.
Ryan Wyse: Yeah, there's been a global sell-off of bonds for a whole bunch of reasons: persistent inflation in a lot of markets, particularly in the US, huge government deficits, all this AI capex spending. So you, there's so much debt coming from AI companies that's competing with government debt-
Ryan Berlin: Yeah.
Ryan Wyse: ... there's a whole bunch of reasons. And government bond yields everywhere have gone up. So as bond prices go down, yields go up. And so in the US, in Canada, across the globe, we've seen bond yields tick up: 5-year, 10-year, long-term yields. And so when the Government of Canada's 5-year bond yield goes up, that makes fixed mortgage rates more expensive. So because the Government of Canada's 5-year bond yield has come up... So, uh, fixed rates are priced off of that. The 5-year fixed rate's priced off of that. So now fixed rates have started to rise, and if bond yields continue to go up, you can expect fixed rates to follow.
Chris Gill: When fixed rates start going up, I've definitely noticed over the years that the condo market, the more affordable markets, get a little busier, because people want to get in while they have their rate holds. So if that's the case, then that's probably good news for, for the condo market in Victoria and potentially Vancouver as well. But that's definitely one thing that I see.
Ryan Wyse: Yeah, those price-sensitive buyers-
Chris Gill: They're the most sensitive to price.
Ryan Berlin: So, yeah, maybe that's not the worst thing for the market. I mean, it's, it's, it is a source of urgency where there essentially exists .
Chris Gill: Well, and, and also, going back to Victoria, the market's typically busy in the spring, quieter in the summer, busy in the fall, quiet in the winter. So we're now getting into September, and we're expecting things to kind of pick up a little bit that October. But we definitely had a, a decent summer, I thought.
Ryan Berlin: So, you know, it's interesting when we talk about yields and rates and where that stuff is going. You know, obviously the, uh, lunatic running the asylum south of the border wants lower interest rates, but I don't think he fully understands... Like, the Federal Reserve just increased the federal funds rate by a quarter point, so that, that set him off yesterday. You know, I think that's the 1st step for that central bank, and for central banks in general, to demonstrate a seriousness about containing inflation, because a lot of those longer-term yields are built upon inflation expectations, right? And if, if the market... There's nothing nefarious going on. Just if the market, if investors generally feel like, "Hey, there's some reasons why I'm going to need a higher return. The trajectory of government debt is an issue." To your point, there's corporate debt paying higher yields. That's going to pull up the yields on government bonds. But listen, if, if the actions by the current government or the dynamics in the economy point to, like, persistently high inflation or rising inflation, well, those yields are going to be higher. So I think I was pleased to see the Federal Reserve raise their policy rate by a quarter point, because that information was all essentially built into the existing market for Treasuries in the US. But I think it has the effect of containing inflation expectations at the margin. And so that increase actually should help to flatten the yield curve a little bit and actually achieve the thing that the president wants, which is lower rates generally. And, you know, he probably has a lot of adjustable-rate debt, is my guess, so he wants, he wants the federal funds rate low. And anybody who does have a variable rate, like, obviously, like, what this, what your central bank is doing matters a lot in the moment. But I think bigger picture, when it comes to housing, it's really what is happening in the bond market.
Ryan Wyse: And I think it's important to point out inflation's running a lot hotter in the US than it is here, and it's been stubbornly high, and it's increasing, and their core measures of inflation are increasing, which the Federal Reserve cares a lot about. So, yeah, to your point, they need to get inflation under control, but they also need to get inflation expectations under control. They also need to give the appearance of an independent Fed that's actively fighting to keep inflation under control. And so that's one step towards that that I think was really important.
Ryan Berlin: Is there anything else you want to add on that topic, or not?
Chris Gill: I saw diesel over 3 bucks when I went for a walk. 304.9.
Ryan Berlin: Holy crap.
Chris Gill: Diesel. It's a cheap fuel, I thought-
Ryan Wyse: That's a cost input on everything you buy.
Ryan Berlin: The fear is that diesel just keeps ratcheting it up, because if you track diesel prices over the course of this year, there hasn't been much of a, a retreat at any point. Even though crude oil came off and then rebounded, diesel just essentially kept going up and up. And, I mean, eventually the rubber hits the road, no pun intended, on that, because everything we buy relies on diesel, essentially, right? It gets moved around. That's how it gets in our hands.
Ryan Wyse: It's either margins getting squeezed or retail prices going up, or both-
Ryan Berlin: Or both.
Ryan Wyse: ... and there's only so much room in margins.
Ryan Berlin: Within Greater Victoria, I mean, there's a lot of texture to the region, just like any region, but it isn't one place to, to live and to buy a home and, and, and all that stuff. So if you were somebody who is thinking of moving there, like, right now, what are the areas that you see as being up and coming, or where there's an opportunity right now if you're a buyer?
Chris Gill: You have your staples, which are where people want to live: Oak Bay, Fairfield, that sort of thing, Rockland. Uh, and then I think up and coming... And, I mean, I've been in the business just over 20 years now, and Esquimalt's always been up and coming. Um, you're so close to town. You got water around you. Like, it checks a lot of boxes. There's been a ton more development there. As a municipality, they're very developer-friendly compared to the Saanich or Victoria, the Oak Bay, that sort of thing. So I definitely would say Esquimalt. They're open for business, and, and they're doing things. So, and proximity to town, it makes sense. Um, Vic West is another one. They're opening up some funkier shops. There's a little bit of development going on there. I'm doing one there. I lived there when I was in university, and I, I liked it then. It's grown a ton since. So I, I would say kind of Esquimalt, Vic West, just over the bridge.
Ryan Berlin: Yep.
Ryan Wyse: Yeah.
Ryan Berlin: And then, I mean, Colwood and Langford still driving growth in the region.
Chris Gill: Langford and Colwood, yes.
Ryan Berlin: Yeah.
Chris Gill: And I think we have the... Yeah, they do have more land, for sure. Uh, we're landlocked, being on the island, so you have to go west or north. So with the elections coming up too in October, I... Yeah, it looks like they'll be rolling again, because the Langford municipality that's currently in is not as friendly.
Ryan Berlin: Oh, really? I didn't know that. Yeah. My whole career... When I was, before I was at rennie and I was consulting, I did a bunch of work for the Capital Regional District and worked with the municipalities. And at that time, uh, so this is, this is, like, more than 10 years ago, but Langford was... There was no amount of growth that Langford could not accommodate.
Chris Gill: Right, right. Yeah. So that changed in the last election cycle.
Ryan Berlin: Interesting.
Chris Gill: And I think with the way property taxes skyrocketed when that happened, um, people are going to be going back to, uh, to the well.
Ryan Berlin: I noticed in Langford there's, um... I mean, I don't, I don't tour around surveying every last corner of the municipality, but as I drive through, I notice a lot of terracing-
Ryan Wyse: Yeah.
Ryan Berlin: ... like, a lot. It, it seems to me, like, I know Langford, Langford has a reputation for being open for business historically and actually building homes and welcoming families, and that it's a lower-cost option as well. It seems to me, though, like, when I see... Like, when I look at where the new development is, and some of it is commercial, it's non-res, and I don't know how much res is within these areas where they're doing so much site prep and so much buildup to get it to a point where they can actually build structures. It just, it seems like that's kind of, like, a bit of a counterweight to the inherent affordability that's there. Maybe that's not, like, a real thing. I don't know.
Chris Gill: Yeah. Your backyard is a lot of times a rock wall, right? Um, 'cause they're building up. Skirt Mountain's been really developed, which is the back side of Bear Mountain. You can see it from the highway. Uh, there's been a lot of, um, well, mostly townhome, duplex, some single family, but they're, they're... It's tight in there. And then at the top, they have some multifamily sites with amazing views.
Ryan Berlin: Oh, really?
Chris Gill: Oh, yeah. Really cool views.
Ryan Berlin: Condos?
Chris Gill: Condos.
Ryan Berlin: Oh, wow.
Chris Gill: Yeah, yeah. There's, there's been a lot more. And then kind of around the Costco, they've developed, and there's, you know, resi mixed in with commercial a lot too. So definitely still going out that way, for sure. Yeah, for sure. Langford is. And, I mean, and Colwood's been good with Royal Bay and stuff like that. Other sections of Colwood, not as much. I mean, uh, Colwood Corners is, was, has been developed, but there's still a decent amount of single family, I guess, in Colwood. I mean, I think last time I looked, there was still some on septic. So-
Ryan Wyse: Oh, wow.
Ryan Berlin: Well, I wonder if you can, as a municipality, afford to sort of just let the status quo remain in areas when you have such a focal point for development. Like, Colwood can both keep things the way they were and be accommodating new people, families, and growth at the same time, because they're not necessarily happening in the same place, right? So it's a bit of a, a different situation than you see in a lot of municipalities in Metro Vancouver, actually.
Chris Gill: Yeah. And then when you look at Victoria, Saanich, where we don't have the land to-
Ryan Berlin: No, no.
Chris Gill: ... to do anything, but it's still broken up decently into neighbourhoods and stuff like that. Uh, like, where my family is, we're close to a ton of amenities, and, you know, it's all single family around there.
Ryan Berlin: At the end of the day, too, it does not take very long to get from one corner of the region to the other-
Chris Gill: Fair, fair.
Ryan Berlin: ... which is great. I mean, which is great, because I, I feel like when I'm in Victoria or in the region, you can feel like you are in a very specific place that's worlds away from others, but, but everything's, like, pretty connected and pretty close.
Ryan Wyse: It's, like, 20 minutes.
Ryan Berlin: Think about going to Sooke, right? And it's like, Sooke feels like the other end of the earth, and, and it's 45 minutes from downtown, right?
Chris Gill: Yeah.
Ryan Berlin: So, um, like, to me, that's not a long drive. I mean, that could be my commute home to the North Shore.
Chris Gill: Yeah, no, fair. Yeah. It, it used to be, if, if it was 20 minutes, that, that, like, that's the max anyone would drive. Now we're 40... 35, 40, I would say.
Ryan Berlin: Okay, okay.
Chris Gill: Yeah.
Ryan Berlin: Good stuff. Any parting wisdom or final words or thoughts?
Chris Gill: I guess when you look at Victoria, like you said earlier, we have the public service sector, but I think we also have some tech in there. We've got the military. We, we, yeah, I mean, we've got a lot of different things. And, and, and the, the biggest thing... And, you know, I have a, I have a cousin down south that's trying to get her citizenship and move here. But a lot of people want to be on the West Coast, and a lot of people want to be on Vancouver Island. So prior to rennie, uh, the company I was with, we used to generate tons of leads online, and the majority of those were from Ontario and Alberta and Saskatchewan. And everyone that you talk to in there, they just, they want to be on Vancouver Island. They want to be in Victoria. That kind of insulates Victoria a little bit more, um, even than Vancouver.
Ryan Berlin: Interesting. Yeah. I mean, there's also, just looking at the demographic data, there's a steady stream of people from this region that head to the island as well, which creates, like, I guess, to your, to your comments about, um, the stability of the region and the market, it adds to that.
Ryan Wyse: Yeah. And if they're already a homeowner here, you know, they, they see it as a discount to go over, right? So you sell a condo here, and, and you have so much more purchasing power.
Chris Gill: Yeah. You sell a condo here, you're getting a townhouse or even a starter home in Victoria. You sell a townhouse here, you're getting a home in Victoria, for sure. And then what we're noticing is those people from Victoria that are cashing out, they're, they're going to be heading up to the Comox Valley, Qualicum, or Nanaimo or something like that, right?
Ryan Berlin: Yeah.
Chris Gill: Port Alberni even.
Ryan Berlin: No, I wouldn't go there. Not yet.
Chris Gill: Sproat Lake. Sproat Lake, one of the most beautiful lakes you'll ever go to, is just past Port Alberni. It's unreal. If you're driving-
Ryan Berlin: Is it en route to Tofino?
Chris Gill: Yes, you will see it.
Ryan Berlin: Yes. Okay. Oh!
Chris Gill: It's on your left-hand side.
Ryan Berlin: Oh, on the left-hand side. Okay. I'm thinking Kennedy. So Kennedy Lake, the big lake.
Chris Gill: Sproat's bigger.
Ryan Berlin: Sproat's bigger?
Chris Gill: Yeah.
Ryan Berlin: Oh.
Chris Gill: Pretty sure. Pretty sure. I could be wrong, but-
Ryan Berlin: Thanks for being here.
Chris Gill: Of course.
Ryan Berlin: Great chat. And if, uh, anyone wants to get in touch because they're selling a home, they're buying a home, or they want to buy a lot from you, how do they get in touch?
Chris Gill: They can email me at cgill, G-I-L-L, at rennie.com, or they can give me a call. The office, 250-382-6636.
Ryan Berlin: Perfection.
Ryan Wyse: Awesome.
Ryan Berlin: Chris, thanks for being here, man.
Chris Gill: Thanks for having me, boys.
Ryan Wyse: That was fun.
Chris Gill: Yeah, it was great. [instrumental music]
Thank you for joining us on the rennie podcast. If you'd like to learn more or to subscribe to intelligence updates, go to rennie.com/intelligence.
