Q&A with Island Realm Real Estate’s Tony Zarsadias on Victoria’s residential housing market and new supply
Ten on the 10th’s May, 2022 segment features Tony Zarsadias, CEO of Island Realm Real Estate. Island Realm, formerly known as The Condo Group, is one of Vancouver Island’s largest real-estate brokerages, with services across Vancouver Island.
Asking the questions is Ross Marshall, Senior Vice President of the Victoria offices of commercial real-estate brokerage CBRE. As a leader in facilitating large-scale commercial real-estate transactions throughout the Capital Region – which include apartment complexes, industrial retail and office properties, and land/development opportunities – Ross and his team are at the forefront of market-leading real-estate transactions on Vancouver Island.
Would you like to be featured as part of a future Ten on the 10th Q&A? We’d love to hear from you.
Tony, please introduce Island Realm for us.
Island Realm Real Estate (iRR) is a real-estate sales and marketing firm with innovative and all-encompassing services for both new development and the pre-owned market. We are local specialists that understand the nuances of development and home buying in communities like Victoria, Nanaimo, and the Comox Valley.
The company has a team 30-plus people, including approximately 20 licensed real-estate brokers who recognize and understand the intersections of psychology and business with home purchasing, and they tailor their services to support and guide their clients through the home-buying process with serenity and understanding.
iRR specializes in new developments and provides comprehensive services to developers including project marketing and consultation. iRR has a deep understanding of the Vancouver Island pre-sale market due to their close-knit community ties and over a decade of experience working with developers to market new projects.
I know you just recently took part in a Q&A with Citified’s Mike Kozakowski (available here), but could you tell us in a nutshell how iRR came to be where it is?
Island Realm is an evolution of The Condo Group. The company was founded in 2007, and at the time it was solely focused on the pre owned market. At that time I was transitioning my focus from being a commercial broker, to a residential one. My background in working with developers made moving into the multi-family / project marketing sphere a natural progression. Since that time we’ve had the privilege of working with some of the most reputable developers in the industry including LeFevre & Company, Chard Developments, Anthem Properties, Casman Properties, Burrard Group, The Marker Group, and PCRE (to name a few).
Our business evolved with our clients over the last decade, and we no longer specialize only in condos as our clients are now building townhouse complexes, and developing single-family subdivisions to keep up with the growing demand for Island living.
The Condo Group had caught the attention of two big firms, one in Vancouver, and the other in Toronto, which were looking to partner with us to expand their reach to the bustling Island market. As much as we were enjoying a great deal of success on our own, we decided that taking on a partner would allow us to expand our services to the next level. We chose to partner with Peerage Capital out of Toronto whose objective was to find niche firms, and give them the resources to do what they already do more efficiently and on a larger scale. Peerage recognized that the Island is unique, and that their presence on the Island was best served by supporting an Island-based company.
The partnership helped us upgrade everything we do including a new downtown location, so we definitely felt the need to refresh our brand to reflect the changes and our expansion of services across the Island. Island Realm is currently working on projects from Cowichan Bay up to Port Alberni. We’ve also expanded our services to include market intelligence for both new developments, and the pre-owned market.
How would you characterize the 2022 real-estate market thus far?
In a word, wavy. After two years of significant increases in sales and house prices, we were due for something to change. We like to use the analogy of sailing on the open seas. The tailwinds that drove our market for the past few years are still as strong as ever. Those
include the fact that we have an aging population that are looking to right-size, growing demand from Canadians across the country who are looking to call the Island home, and of course, the lack of supply of homes of all types. The power of the tailwinds is being tempered by inflation, increases in interest rates, growing supply, and some loss of confidence in government.
Heading into the summer and fall, what should Vancouver Island buyers expect to see in terms of market trends and activity?
Overall, we should see more balance in the market. There is a great deal of public pressure on the cities / municipalities across the Island to create more housing. In turn, we are going to see supply increase. It’s unlikely to be sufficient to satisfy the demand, but it should result in prices of new homes levelling. The City of Langford continues to be the most progressive in addressing our housing needs, so we expect the vast majority of supply to come from there. With that said, there are initiatives being made in the CIty of Victoria to expedite their approval processes for new housing.
In addition to the increase in supply, the rise in interest rates are going to decrease buying power. We already have an affordability issue on the Island, so it wouldn’t surprise me to see a slight correction in property values as a result.
Real-estate across the province has been red-hot over the past two years. How do Vancouver Island’s market trends and activity compare to other BC markets such as Metro Vancouver and the Okanagan?
One of the big benefits of our partnership with Peerage, is we now have direct ties to three other project marketing companies covering Kelowna, the Fraser Valley, and the core of Vancouver. We share best practices and strategies with them on a monthly basis. In turn, we have each learned the nuances of what makes each market unique. Downtown Vancouver, which boasts some of the highest prices for condos in Canada, has seen a shift in the perspective of luxury living. They are experiencing a trend towards the rejection of materialism as people are eager to feel healthier and more secure – they yearn to be part of a solution instead of adding to our social and environmental problems. That’s a significant change in mindset for a major metropolitan city.
The Fraser Valley has seen a similar trend as we’ve seen on the West Shore as there has been a big shift in migration east away from Vancouver to find more affordable housing. The willingness to move away from the city comes from a shift in how many people are working. The requirement to go into an office is no longer necessary for many people. They don’t feel tied to a specific location because of this. Kelowna, which shares the appeal of being an end destination for many people looking to retire like the Island, has many similarities. Housing supply has been in short supply, but is on the rise. Demand continues to grow also, so they expect to see a seller’s market continue over the coming year.
When you think about the next one to two years, where do you think the market is headed and in what areas of the Island do you foresee the most growth?
We are starting to see a lot of more density in the suburbs, largely because people no longer spend the majority of their working lives downtown. The early lockdowns during the pandemic forced businesses to adapt by ensuring employees could be effective working remotely. I don’t see this trend going away any time soon because the ability to work from home is now valued by employees as a benefit most employers can provide to some degree.
Without the constraints of having to live near one’s workplace has also allowed people to buy properties that are in rural areas and be close to nature. The fact that there is an abundance of provincial parks, and seemingly endless options to the oceanfront has always attracted outdoor enthusiasts to the Island. In turn, many people are choosing to live in more rural communities on larger parcels of land.
This trend will continue to drive buyers to explore other markets other than Victoria, or bigger Island communities like the Comox Valley. Areas that should continue to see more of their fair share of growth of multi-family include the Cowichan Valley, Nanaimo, and Port Alberni.
What are some of the biggest opportunities you are seeing for development on the island?
Without question the primary opportunity is with townhouses. Prior to 2020, the Island’s multi-family offerings were primarily in low to mid-rise condominiums. However, the influx of buyers from other parts of the country to the Island pushed the prices of single-family-dwellings out of reach for many residents.
Townhouses, typically priced significantly below single-family-homes, have filled the gap for many buyers. Moreover, the fact that a great deal of supply of townhouses have come to market has given buyers the luxury of having more choices for purchase.
The other big opportunity is to create homes that have master bedrooms on the main living level. I always say the one thing that will ultimately catch up with everyone is mobility. The baby boomers have the greatest amount of wealth in Canada, and because they are aging, a primary consideration they are making is whether their home will be viable to live in as they slow down.
Given our new normal (remote working, intermittent public health restrictions, the ongoing pandemic, flight from the cities) what is your main advice to developers today about where they should be building, and the types of homes they should be designing for buyers of today and tomorrow?
With people working and spending more time at home, having functional living space is critically important for today’s buyers, including a dedicated office space within a residence. These office spaces should allow for multiple monitors, hardwired ethernet, sound dampening, and good lighting. Also, with the rise in e-commerce, there is also demand for having packaged delivery space to store and secure packages.
Finally, having pet-friendly amenities is a big consideration. We are seeing several developers of multi-family homes either include a pet wash station, or have hot and cold taps on their exterior townhouse hose bibs.
Other than the new trends that have already emerged and evolved, what new trends do you expect to emerge in the next few years? What will be the focus for future developments?
There is a younger buyer that’s emerging as a transfer of wealth from the baby boomers is occurring to both Gen Xers, and Millennials. Millennials in particular, have become used to having the world at their fingertips. In turn, they value having functional amenities in close proximity to their homes, like gyms, meeting rooms, coffee shops, groceries and local eateries. Ironically, technology was supposed to save us more time, but has actually created busier lives. With a perceived lack of time, young buyers value having the convenience of nearby amenities.
Another trend we’re going to see is more townhomes. The dream of owning a single-family-home with the white picket fence appears to be gone for many young buyers. However, as I alluded to earlier, townhouses have the potential to fill in that void. Buyers should continue to flock to well-designed townhomes with the benefits of having a yard but at a lower price point than single-family lots.
The condo market is tougher to predict because building costs are still trending upwards, even though the market value of condos appears to be settling. Most condo buyers, especially more mature buyers, are seeking larger condos, but recently have not been able to find new-builds large enough. This should change if there is downward pressure on building costs, which would allow developers to bring larger condos to market at reasonable prices. In any event, the condo market should continue to flourish regardless as they appeal to young buyers because of affordability, and also to the Island’s aging demographic because of one-level living.
A design trend we’re likely to see continue to build is increased demand for EV charging stations as people look for green options for transportation. Also on the theme of doing our part for the environment, buyers are likely to consider sustainability, using green materials and methods in their purchase decision. We are valuing wellness, health, safety and time perhaps more than ever.
As a bonus question, have the unprecedented and unpredictable construction costs and rising interest rates caused any developers to put their development plans on hold to wait out the storm before starting pre-sales?
We have yet to see anyone put their plans on hold before starting pre-sales. Our clients are paying closer attention to the market than ever though, hence we have made a significant investment into market intelligence. With more comprehensive data in their hands, they are able to make better decisions. With that said, I would not be surprised to see developers in Greater Victoria shelve their projects for a period of time until costs settle down, and we have a clearer picture of how interest rates are going to affect demand. The projects that I expect to come to market regardless of market conditions will come from developers who have a high level of vertical integration. In contrast, those that are relying primarily on contractors / sub-contractors are more likely to sit on the sidelines.
We appreciate the insights, Tony. If our readers want to see the developments you are currently marketing, where should they go?
We have several projects that are going to come to market this year, including condominiums located in the heart of the commons in Royal Bay but those presentation centres are not open yet. The best place to see some great pre-sale offerings is at One Bear Mountain, and for luxury finished product at the Cameo in Sidney. You can also visit our website as we update our listings frequently.