When schoolteacher Joshua Ogden decided to buy property in the remote B.C. town of Kyuquot, he faced an inconvenient dilemma.
Ogden learned banks were skeptical about providing mortgages to buy property in the tiny community on Vancouver Island’s northwest coast. Banks in Campbell River told him a regular mortgage was impossible. Private lenders, meanwhile, would require a 35 per cent down-payment with a minimum seven per cent interest rate.
Independent mortgage brokers pointed out that no bank or financial institution will lend to a place with limited accessibility. Kyuquot is accessible only by boat or float-plane.
Matt Bruining, manager of Royal Bank of Canada’s Campbell River branch confirmed Ogden’s story.
He said that while the lending policy for the bank is standard throughout the country, there are external factors to be considered if the property is not in a “service area.” Properties that lack easy access to fire-safety services, are examples of what the bank considers a “non-service” area. Insurance, and the cost of maintaining the property are also other criteria that weigh in on the lending decision.
So when a person with a good credit score can’t get a mortgage for a property in such areas, Bruining said the bank is “not declining people, but it is declining the property.”
Ed Handja, is a realtor with BC Oceanfront Properties. In his 25-year career, he has sold six properties in Kyuquot and considers it a “limited market,” meaning properties there can typically take anywhere from two months to two years to sell. Most banks consider that a financial risk not worth taking.
“Banks aren’t really comfortable because they do know enough that if they end up taking a property in foreclosure situation, it could take couple of months or years for them to sell it and they don’t want to get themselves into that situation,” said Handja.
Kyuquot is a vibrant community for four months of the year. However, at other times, outside of the Kyuquot Checleseht First Nation treaty land, it is almost a ghost town. On Walters Island where Ogden lives, most homes are owned by summer residents who use it as a holiday home.
Despite that, Ogden said renting was not easy either.
“Of the properties outside Kyuquot Checleseht First Nation treaty land, majority sit vacant for much of the year – unavailable to rent or purchase,” said Ogden.
Home owners are not comfortable giving out their properties for rent. Donna Holmes Vernon, a home owner on Walters Island who rented her place three times in the past said, landlords who don’t live in Kyuquot face “serious limitations” when it came to maintenance.
First of all, there was always damage done, said Vernon. Secondly, insurance prices and hydro rates on Kyuquot are exorbitantly high.
A lot of “outsiders” have bought property in Kyuquot because they had the money to pay up front said Eric Gorbman, who resides and runs a restaurant on Walters Island. Twenty years ago when Gorbman, an American, bought his property, locals were horrified, he said.
But the trend continued for a while when Kyuquot’s real estate was in demand by the “million-dollar club” of Americans, Vancouver-based tycoons, and out-of-province buyers who “gobbled” up property when it became available.
However, after the 2008 financial crisis in U.S., demand decreased. The owner of one of the last houses sold on Walters Island had to lower his price to the point where he literally had to give it away, said Gorbman.
The dilemma is always going to be a “circular issue,” said Gorbman and added that since locals cannot afford to buy houses, outsiders will continue to buy houses, most of which will be left vacant when they’re not around. He said this is something the provincial government needs to figure out.
“What Kyuquot needs to survive are young families, who can be assets to the community. But if they can’t find places to live, it’s a different thing altogether.”