Startling multi-family land prices are creating a “disconnect” in a high-rise condominium market that increasingly must rely on immigrant buyers, according to a noted real estate consultant.
At current “buildable-per-square-foot” prices, a typical new 750-square-foot condo has to have a baseline price of $112,000 just to cover land costs. On the west side of Vancouver the same price is closer to $187,000, according to numbers provided in Colliers International’s recent Land Share report.
The report calculated what Metro Vancouver developers are paying for multi-family land based on the allowable floor space ratio (FSR), basically how much residential real estate can be achieved on the land.
As an example, Care Pacific Holdings Ltd. paid $13.9 million this year for a 36,000 square feet (0.8 acre) site on King Edward Avenue in Vancouver’s Kitsilano neighbourhood. The site has a 1.75 FSR, equating to a cost of $220 per buildable square foot, before any construction, finishing or marketing of the site is even started. In downtown Vancouver, such prices approach $250 and average more than $150 in East Vancouver.
This level of prices shows a disconnect from the Vancouver economy, warns Frank Schliewinsky, principal of Strategics Marketing, which publishes the Vancouver Condo Report, a long-running industry newsletter.
“The Vancouver high rise condo market is becoming increasingly disconnected from the local economy and from local buyers,” Schliewinsky said “ In the past year, the new high-rise condo market has shifted so much away from its historical basis that it really can't be considered as a ‘Vancouver’ housing market anymore.”
Over the past 12 months the average asking price for new high-rise condos in Metro Vancouver has increased by 26% and the average price per square foot by 16%, according to Strategics. And, based on what developers are paying for land, future condominium prices appear destined to keep rising.
Yet “[there has been] no big increase in average household income,” Schliewinsky said.
In fact, Vancouver ranks dead last in median incomes for university-educated workers among Canada’s 10 largest cities, according to Statistics Canada. The median income for a Vancouverite with a university bachelor degree is $41,981 compared to a Canadian average of $50,981.
Strategics and MPC Intelligence, which also tracks new condominium developments, report that 27 high-rise projects began marketing in Metro Vancouver this year, with an average price north of $625,000 per unit.
“Based in interviews with sales staff in these projects, 60% are targeting investors and 70% are targeting "immigrant" buyers,” Schliewinsky said. “Without Chinese buyers, there won't be much local demand to support the Vancouver high-rise market. At the end of September, there were an 5,600 unsold high-rise units in new projects and another 1,460 units still to be released in projects now marketing.”
