Vancouver a gateway to U.S. property deals for Asian buyers
It’s no surprise that U.S. real estate has been attracting a steady stream of investors from Canada, but Mike Kent of Windemere Real Estate Whatcom Inc. in Blaine, just across the border from White Rock, is amazed at the stunning increase he’s seen in investors from Canada backed by offshore capital.
“I figure that greater than 50% of purchases in the last 15 months have been Asian buyers out of Vancouver. That’s been a recent phenomenon; we never saw the interest prior to that,” he said.
Kent estimates that more than US$35 million in properties has been snapped up in the past 15 months, totalling approximately 1,200 acres. The most recent deal was last week’s Union Bank sale of the 145-acre Horizon at Semiahmoo development to North America CC Chang Jiang Investments LLP for US$5.9 million. The principals, Mao Hua Chen and Ming Yan Liu, live in Vancouver. And, last summer, North America Chen’s Holdings LLP paid US$2.4 million for the former Sea Links Golf Course and CJ’s Beach House restaurant on the heels of US$9.4 million worth of purchases by Richmond-based Jun Yu Development II LLC.
Two other properties are now under discussion with Asian buyers living in Canada.
Kent said a number of reasons have been given for the transactions. On the one hand, buyers can use Canada as a stepping stone for investing capital from China in the U.S. market. On another, properties in Whatcom County allow investors to tap the opportunities available in the U.S. market without straying too far from Canada. But their presence is breathing life into a market still suffering from the 2008 financial crisis, Kent said, raising the prospect of long-term stability.
“When investors domestically were buying and selling properties, their timeline was very short, they were heavily leveraged, so as soon as the market turned they lost their properties,” he said. “These folks are very, very well capitalized. They have the staying power to be able to see through what they start.”
Keep it local
Panellists at the Urban Development Institute’s annual forecast luncheon in Vancouver on January 24 were focused on keeping pace with local real estate markets.
Bentall Kennedy executive vice-president Tony Astles told municipalities to focus on fostering and accommodating existing businesses rather than spending efforts to attract headline-grabbing new ventures. Bosa Properties Inc. president Colin Bosa urged investors to look at local market data rather than conflicting media reports to identify opportunities – a bugbear of fellow panellist Anthem Properties Group Ltd. CEO Eric Carlson.
“The local economics of smaller regions, and separate industry sectors here in Canada, and particularly in the West, allow us to make progress in strange times,” Astles said. “Real estate can be about very local economies, local events, and local knowledge. You can make good returns – locally.” This is particularly the case for downtown Vancouver office owners. Astles said these landlords are enjoying good times, with rents set to rise through 2015. While the many towers under construction may boost vacancies and bring down rents, this isn’t guaranteed. And even if it does, a worst-case scenario doesn’t herald the end of the world.
“You throw all these new projects in and you get a 10% vacant market, if we don’t have vacancy reducing through absorption,” he said. “That’s OK – a 10% market’s normal.” Astles pointed out that Bentall 5, completed in 2007, took 25 years to plan and build. Its current tower under construction at 745 Thurlow Street is on track for a 14-year timeline.
“So let’s be reasonable,” he said, assuaging the audience’s fears.
Mayor Gregor Robertson recently boasted of the city’s approval of 1,021 new rental units in 2012, but actual starts in the city totalled just 780.
However, for the first time since 2006, market rental starts outstripped social housing starts at 540 units to 240 units.
Moreover, construction activity in Vancouver increased while starts for Metro Vancouver as a whole dropped to 1,277 units in 2012 from 1,755 in 2011. •