Peter Mitham , Business in Vancouver
January 23, 2018
Purpose-built rental apartments are a hot topic these days as politicians continue to seek to be seen to be doing something about housing affordability.
Preliminary year-end numbers from the Goodman team at HQ Real Estate Services Inc. indicate more than $2.1 billion worth of apartment properties sold across the Lower Mainland last year. The tally was approximately 44% above transaction volumes in 2016.
The increase occurred despite a lower number of properties changing hands, which helped push average per-suite pricing to new highs. Metro Vancouver as a whole saw per-suite pricing approach $420,000, while Vancouver itself hit $535,000 and suburban rental properties sold for an average of more than $385,000 a unit.
Recent listings making the rounds in 2018 reflect the shift, with Avison Young circulating a listing for a 23-unit property at 223 East 16th Avenue priced at $500,000 a unit.
While a lack of supply seems set to keep the number of properties changing hands in check this year, the steps various levels of government are considering to enhance housing options for tenants and buyers are also slowing deal-making.
“Trying to interpret all the different machinations of policies and various planning departments is time-consuming, and the lead time for transactions is much longer,” said Mark Goodman, who brokers multi-family properties with David Goodman and Cynthia Jagger at HQ Real Estate.
The province shut a loophole in the Residential Tenancy Act last fall that let landlords sign tenants to one-year leases, an arrangement that saw the terms – particularly rents – reset rather than renew at inflation plus 2%. The loophole saw many tenants in situations where huge rent increases left them scrambling for cash or new accommodation.
Another provision of the law, which allowed landlords to seek rent increases at properties where rents were out of line with the average for the area, was also addressed.
Combined with various municipal policies, many multifamily property investors have sought to invest in municipalities that offer any sort of leeway on future development options for properties.
Burnaby is a case in point, where the passage last year of the Metrotown Downtown Plan is letting owners make good on their investments.
“There’s been a general slowdown in apartment building sales, but the sales that have occurred have been quite large – especially in Burnaby,” said Mark Goodman. “It’s been extraordinarily active, with a lot of those properties being sold as development sites because they upzoned the area.”
With approximately 18 properties changing hands last year, Burnaby ranked second to Vancouver in terms of the number of apartment buildings sold in 2017. Preliminary calculations indicate the average sale price was $551,993 a unit, on par with the active Kerrisdale neighbourhood in Vancouver.
“Prices still continue to climb, in part because a lot of this is land value – higher and best use, because the properties are being purchased for land value and not for the income,” Goodman said.
And what will become of tenants, of which advocates claim 6,000 are at risk as Metrotown morphs into Burnaby’s downtown core?
Two low-rise properties on Silver Avenue that Belford Properties Ltd. bought in 2015 for $38.8 million offer some insight into what happens in the wake of an acquisition.
Belford is building 479 residential units on the site, replacing 109 rental apartments. Sun Towers, as the project is known, will also include 70,000 square feet of strata commercial space that’s attracting attention from medical and law offices.
The development is part of the ongoing densification of Metrotown, an area rich in transit and retail options. Burnaby staff anticipate the area’s population rising to 345,000 by 2041, or 120,000 more residents than today.