865 West 10th Avenue
Peter Mitham, Business in Vancouver
July 15, 2014
Rental apartment owners are also holding on to what they’ve got, boosting per-unit prices in some parts of Metro Vancouver by as much as 25%.
Brokers David and Mark Goodman report that sales in the first half of 2014 have been strong, totalling 61, compared with 45 sales in the first half of 2013.
But to obtain those properties, buyers paid an average of $302,179 a unit in Vancouver and $167,273 in the suburbs – increases of 13% and 22%, respectively, over prices paid in the first half of 2013.
While the effects of the provincial election last May can’t be ruled out – deal activity surged across all asset classes when voters returned the BC Liberals to power – the Goodmans note that activity was especially strong in three areas: Kerrisdale, Burnaby and North Vancouver.
Developer activity has been key in Kerrisdale and particularly Burnaby, where five properties traded on the strength of their redevelopment potential.
Meanwhile, the Goodmans’ $25.5 million sale of 151 East Keith Road in North Vancouver occurred at a significant premium to previous pricing for the area.
But buyers are tending not to overpay. While financing remains cheap, at less than 3.5% for a 10-year mortgage, and a lack of available assets favours vendors, buyers are savvy to value. David Goodman isn’t sure sales volumes in the second half of the year will match those in the first half.
Many owners face hefty capital gains taxes on the sale of assets and have few other areas to invest their cash that provide such steady returns.
A 25-year-old city policy restricting the demolition of rental apartments in the West End was broadened in 2007 to prevent a net loss of rental units city-wide, and Goodman points out that even an uptick in new rental construction in Vancouver thanks to municipal policies has done nothing to soften vacancies or lower rents.
This leaves owners, in the Goodmans’ words, “sitting pretty.” However, the shift in activity to suburban properties indicates that investors are increasingly willing to look beyond Vancouver proper to expand exposure to rental properties and provide opportunities for redevelopment.