Victoria is going through a significant expansion cycle right now with cap rates in the 3.8% range. (See the Colliers Q2 2017 multifamily report
http://www.collierscanada.com/en/co...ultifamily-market-report-q2-2017#.WW4hi4TyuUl). Some transactions trading sub-3%.
From what I have seen, I think multifamily valuations in most of Canada and most US markets are overvalued for the income they are putting off. When you get into 3% cap rates in a 4.5% cap rate average environment for Canada you are saying that Victoria will grow at 1.5% more than the average income growth for the rest of the country forever.
Investors getting into the market should know they are "buying high" right now. Maybe it goes to a higher high, there are some legitimate supply constraints and pent up demand. But in a world where interest rates are hiking in Canada, how do you see cap rates continuing to compress? Cap rates will most likely expand in response which means your valuation growth is only from rents...what drives rents? In Canada, it is primarily interest rates, credit availability, and secondarily job growth.
Victoria is not a "value" investment it is a "growth" strategy. At 80% LTV you will have $0 cash flow, probably negative and are betting on ever higher-highs. Nothing wrong with that but that is the strategy.
My view of the Victoria strategy is a quick in and out, probably a good environment for flips and refurbs right now. Very low vacancy but a lot of supply in the pipeline about 6,000 units. Keep in mind the rental universe is 16,000 units, according to CMHC October 2016. If 30% of those units are rentals that is an 11% increase in market supply...this will affect rents. I don't view it as a great investment for highly leveraged investors (more than 60% LTV), but it is a highly, highly desirable market and has bandwidth to grow.
Its limitations are location, jobs, industry, and logistics. It is a beautiful place and if you are comfortable with a bit smaller returns than a secondary market (maybe 2-3% lower) it is an attractive investment.