The demand for housing and low-interest rates fueled Victoria’s construction boom.
But Luke Mari, principal and development lead at Aryze Developments, said he’s already hearing about a slowdown caused by rising rates.
“Yes, I’ve heard a few projects had to be paused, or completely cancelled,” Mari told CHEK News. “As far as off the top of my head, it’s about 800 units over three projects on hold.”
Mari says the rental sector is hit particularly hard by the hike in interest rates.
READ MORE: Bank of Canada hikes key interest rate by full percentage point
His company has had to find more money in order to get funding from the various levels of government for one 68-unit rental project.
“Last year, our equity requirement was around $2.5 million. And in the last six weeks alone, it’s ticked up to $6.3 million. And in the last 24 hours, it’s gone to $10 million.”
Mari said that’s capital that’s been allocated to one project instead of going to five projects.
For people looking to buy a new home, today’s Bank of Canada rate means that a $500,000 mortgage at three per cent interest translates into monthly payments of $2,366.
But with four percent interest rates, monthly payments jump by $264 dollars, with an annual increase of $3,168.
Auxilium Mortgage Corporation owner Kam Brar says housing prices should come down as potential homeowners are squeezed out of larger mortgages.
“That same $2,000 due to the rates only allows me to get into a $400,000 house. Prices are going to have to adjust to that, and they are going to adjust downward to find that point.”
Overall, Mari says it may mean a difficult rental market is about to get even tougher.
“So it just means less housing,” he added.
And years of rock bottom interest rates may finally be a thing of the past.
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Mary Griffin
