Double digits
Arctic inflows aren’t enough to chill the Vancouver property market, with a host of recent indicators pointing to its ongoing heat.
BC Assessment Authority notices delivered news last week of double-digit increases in valuations for many properties in Vancouver, while the annual sales stats from the Real Estate Board of Greater Vancouver (REBGV) recorded an 18% increase in the benchmark price for resale properties over the past year.
Sales, too, remain at elevated levels. REBGV reports that 39,943 units sold through the Multiple Listing Service in 2016, the third-highest tally ever, while industry estimates peg new multi-family units sold at more than 19,000.
This has made for tight supplies of new and unsold properties – not to mention rental units, with Canada Mortgage and Housing Corp. (CMHC) reporting a 0.7% vacancy rate in the Vancouver metropolitan area last month.
The supply limits exist despite record home starts in excess of 26,000 units (CMHC will release the official numbers this week). That’s close to 40% more than in 2015, while rental starts rose in step.
The conditions prevail despite seven new policies various levels of government have announced in recent months that Simon Fraser University Beedie School of Business finance professor Andrey Pavlov feels should have cooled sales.
These include an increased property transfer tax on foreign purchasers, tougher mortgage qualification requirements and tighter regulation of real estate licensees.
While they’ve had a “meaningful impact,” Pavlov doesn’t believe the aggregate effect will be as dramatic as expected.
In fact, Scott Brown, president of Fifth Avenue Real Estate Marketing Ltd. in Surrey, believes the measures will encourage buyers to look at multi-family properties.
While detached homes have taken a hit, multi-family properties have withstood the regulatory onslaught. With the province’s assistance to first-time homebuyers – which Brown says was “like a Christmas gift” – there’s plenty of momentum to keep sales humming.
“All of those benefits really only drive people to multi-family, because there’s not a lot you can buy as a first-time buyer in single-family detached below $750,000, even in Maple Ridge or Langley,” Brown said. “We’re going to continue to see a little bit of downward pressure on all these houses over a million bucks on the resale side, but I think the condominium market … is actually going to perform quite well to start the year.”
Second-least-avoided
The past year saw Canada emerge as a two-city country, at least for investment purposes.
“You have all this money, and it’s only invested in two places,” quipped Tony Quattrin, vice-chair of the national investment team at CBRE Ltd., back in October.
Toronto had edged out Vancouver as the destination for the capital, claiming 38% of investment volumes in the first half of 2016 versus 34% in its West Coast rival. (The remaining 26% was spent in markets across Canada.)
A more recent report from CBRE underscores the split.
While the Urban Land Institute recently picked Vancouver as Canada’s best city for investors in 2017, a CBRE survey of lenders found that many are looking to Toronto.
Approximately 80% of lenders strongly favoured Vancouver last year, but steady compression in cap rates and more conservative loan-to-value ratios as asset values rise has led to just 68% of lenders strongly favouring the city today.
By contrast, the Toronto market is now strongly in favour among 84% of lenders, versus 77% last year.
To be fair, however, there’s no city that lenders want to avoid altogether.
Winnipeg, for example, is the least-favoured city in Canada, with 37% of lenders having no interest in the place. Halifax is the second-least-favoured city, with 32% of lenders not giving it a thought.
Vancouver is the second-least-avoided city in Canada, with 16% of lenders having no interest in lending here. Toronto and the Ottawa-Gatineau market come out on tops, with just 11% of lenders having no interest in the opportunities they present.
