Breaking a billion?
The numbers are in, and sales of purpose-built rental buildings for the first half of 2015 are pointing to an active year for the sector.
Indeed, if activity continues, apartment brokers David and Mark Goodman expect a total of 155 sales in the Lower Mainland this year, the third-best tally ever. Given the pricing seen to date, that could put the aggregate value of those sales in the $1 billion range – a first for the region.
Tracking by the Goodmans indicates that 74 sales occurred in the first half of 2015, versus 61 in the same period last year. The total value of the deals was $458.9 million, with the majority attributable to sales in Vancouver proper even though sales were evenly split between the city and surrounding municipalities.
Per-suite pricing tells the story: while the average for all deals done in the Lower Mainland was $238,272 per door – $7,000 more than in the first half of 2014 – the average per-suite price in Vancouver rose 10% to $332,653, while elsewhere prices dropped 7% to $189,296 a suite.
Two factors played into the spread in pricing, explained David Goodman. Historically, properties in Vancouver have always been worth more than in surrounding municipalities, and this year was no different.
However, a quarter of the 1,268 suites changing hands outside Vancouver were located within a single property in Surrey. The larger scale of the property effectively resulted in lower pricing for the units, reducing the overall average.
Dense topic
A long-standing issue for the Goodmans has been Vancouver’s restrictive policies in the residential multiple-dwelling zones that are home to most of the city’s purpose-built rental stock. While the city seeks no net loss to the existing stock, it was equally opposed to a recent proposal to replace a 16-unit building in Kitsilano with an 80-unit structure.
With vacancies for the region down 28% in the latest Canada Mortgage and Housing Corp. rental market survey, and apartment stock up by just 648 units region-wide (or 0.6%), Goodman warns that tenants face less choice and higher rents.
Some landlords are boosting rents by up to 20% between tenancies, he noted.
Of course, Vancouver isn’t alone in grappling with tight housing stocks.
A draft report by Seattle’s housing affordability and livability agenda advisory committee includes a number of recommendations familiar to Vancouver readers, including expanding and densifying the city’s urban villages and orienting new multi-family development to transit, shops and services.
The draft recommendations also propose eliminating single-family zoning as Seattle knows it, approving the city’s 120,000 single-family lots for secondary units and backyard cottages. There are approximately 1,359 of these now, but the report suggests that 6,000 could exist within a decade. Some would occupy land no longer needed for off-street parking, which the report deems “an artifact of an earlier era.”
Those who’ve sought reform of B.C.’s contentious property transfer tax will also note the suggestion that Seattle implement a 1.78% levy on property sales to fund affordable housing.
Investment slumps
Statistics Canada has finally released its forecast for public and private investment intentions in 2015. And while the year is half gone, the revamped survey, which estimates capital expenditures, rather than investment, forecasts a dip in spending.
Capital investment by real estate, rental and leasing firms will continue to cruise at historically low levels, with the agency pegging intended spending by the sector in B.C. at $1.24 billion. This is the second-lowest level of investment in the past decade (investment peaked at $2.1 billion in 2008).
The drop is marginal compared to last year, however, with the sector holding its own better than the construction sector, which Statistics Canada forecasts to cut spending by 3% to $793 million. Yet in contrast to the leasing sector, spending by construction companies will be the fourth-greatest of the past decade and well above the $598.6 million spent in 2009.•
