Stabilizing trend
Despite strong industrial sales, there are signs activity may be stabilizing, a local appraisal firm says.
While markets such as the Fraser Valley are on track for a record tally of investment deals this year, with Avison Young forecasting aggregate 2011 sales values to exceed the 2008 record of $269 million, Grover, Elliot & Co. Ltd. notes that year-over-year transaction values have dropped.
The firm based its findings on five years? worth of sales data for properties valued in excess of $10 million. The current year figures are based on the 12 months ending September 30.
?Total value is down nearly 20% compared to the 12 months previous, and the average price per transaction is down nearly 10% to $19.1 million,? Grover, Elliott reported.
The aggregate sales tally for the 12 months ending September 30 was $191.4 million. Conversely, average sale price per square foot rose 22% over the same period.
?People are bidding up and paying fairly ridiculous prices right now,? explained Larry Dybvig, president of Grover, Elliott, noting that this is especially true of smaller properties.
He added that the larger, more expensive properties don?t trade as often but provide a more stable data set.
Grover, Elliott?s examination of the five years? worth of deals found the average industrial property traded for approximately $18 million and averaged 165,000 square feet. Average price per square foot of gross building area was $125, but ranged from $60 to $246 a square foot.
While aggregate sales tallies for larger properties are declining, Dybvig expects continued interest in smaller properties.
?Demand is so strong right now that anything that hits the market that?s got a cash flow is attracting investment dollars because it?s better than the stock market, it?s better than the bond market,? he said. ?We certainly haven?t seen anything suggesting anything other than continued market strength.?
Who wins?
Vantreight Farms in Central Saanich recently emerged victorious from court wrangles over the rezoning of a 32-acre site where it wants 57 residences built. A BC Supreme Court decision upholding the municipality?s designation of the site for development against a challenge by the 80-member Residents and Ratepayers Association of Central Saanich Society frees the municipality to confirm the site?s rezoning and subdivision.
Sales could proceed as early as spring 2012, yielding revenue that will pay off a mortgage required when owner Ian Vantreight acquired full title to the property from his brother Michael following their father?s death in 2000.
The funds will also support operations on the farm?s 384 acres, 100 acres of which is being shifted into organic vegetable production. The farm is also well-known for supplying daffodils to the BC Cancer Society each spring for fundraising.
But in a counterproductive development, the four-year process of negotiations with Central Saanich and ensuing court battle required the Vantreights to use a significant chunk of the original 500-acre farm to cover carrying costs and other expenses.
One parcel is now home to a 10,000-square-foot house.
The irony isn?t lost on Ian?s son Ryan Vantreight, who oversees the 128-year-old farm?s operations and feels the court battle was counterproductive.
?People didn?t get it,? he said. ?The people for food security, people for farmland trusts, people who want to see farming protected and continued are the same people that are trying to stop this.?
Plus ça change ?
The latest RBC Economics report reduced the volume of its clucking over the state of housing affordability in B.C., but even the slight improvement in local housing affordability measures in the third quarter didn?t stave off all gloomy comment.
?With more than 94% of a household income needed to cover the ownership costs of a two-storey home or nearly 91% for a detached bungalow, the ownership bar is still incredibly high in the Vancouver area,? report authors Craig Wright and Robert Hogue write. ?And such extreme unaffordability appears to be driving local buyers away.?
Close readers will note that it?s just the local buyers being driven away; presumably, the enigmatic foreign buyer is boosting measures that reflect unaffordable conditions in the city.
Still, the report?s forecast of slackening market conditions is warranted, as declining home resales suggest pricing will ease. While the Canada Mortgage and Housing Corp. forecasts resale home prices to increase 2% in 2012, Real Estate Board of Greater Vancouver figures indicate that any gains will be gradual.
The benchmark price has increased no more than 8% since December 2010 (the latest figures will be out as this issue goes to press), with month-over-month shifts – up and down – of no more than 1.7% in all but one of the last 12 months. It?s a trend that looks set to continue. ?
