IN THIS WEEK’S FACTS BY EMAIL:
- SOME OFFICE STRATAS PRICED HIGHER THAN CONDOS
- MIX VANCOUVER HOMES WITH INDUSTRIAL, ARCHITECT URGES
- FOREIGN OWNERSHIP SURVEY STILL LACKS CREDIBILITY
- CONDO INVESTORS SHOULD BE FLIPPING MORE THAN HOLDING
- PRINCE GEORGE. PRINCE RUPERT AMONG FEW RISING MARKETS IN NORTH
- WHISTLER CHANNELS WALT DISNEY WITH MEGA PROJECT
- CUBA IS NOT LIBRA BUT REAL ESTATE IS FOR SALE
- SUMMER STUDENT (SFU) AVAILABLE
NEXT ISSUE: FULL REPORT ON REAL ESTATE OUTLOOK 2016 CONFERENCE
Some Office Stratas Priced Higher Than Condos
We have for years recommended to buy strata offices, now they are really coming into their own. So, are you tired of fighting multiple offers when you attempt to buy an investment condominium in Metro Vancouver? Worried about the Residential Tenancy Act when trying to rent a condominium, or the competition from AirBNB?
Perhaps, rather than buying a residential strata, you should consider investing in a strata office unit. Just think: no 24-hour tenants, no residential tenancy, no rate increase caps and a tenant who is responsible for all the finishing and will likely stay put for five years or more.
While everyone in Vancouver is talking about the white-hot housing market, parts of the strata office market have exceeded the appreciation of strata apartments.
An example is the Metroplace and Silver mixed-use towers in Burnaby’s Metrotown by Intracorp. In both these 2014 projects, the strata office space sold for $535 per square foot while the residential condos above sold for closer to $600 per square foot. Last year, Rize Alliance’s Gold House mixed project in Metrotown was selling strata office and residential condos at nearly the same price. Now the Anthem five-tower Station Square development is underway in Metrotown that will include 1.5 million square feet of residential and 450,000 square feet of commercial space. All of these projects appear targeted to an Asian customer base that is comfortable with buying rather than leasing office and retail space.
Where is the next big strata office push coming? Likely it is on West Broadway in Vancouver from Yukon St. west to Oak Street. Residential development is restricted in this area (known as Broadway Uptown) but it is close to both SkyTrain and the Vancouver General Hospital, which makes it popular with medical professionals, who represent the largest strata office buyers in Metro Vancouver. Most of the existing buildings are one and two-storey old timers, but the city zoning allows for a 3.0 FSR. The strip appears prime for strata office development, in fact it has already proven successful. Broadway Central, a 127-unit strata office project by Orca West sold out at $922 per square foot in 2013. Meanwhile Crossroads, a mid-rise project anchored by Whole Foods, was selling residential apartments at about $710 per square foot across the street.
A couple of issues ago, we noted that a China-based investor had bought the Roque restaurant site in Broadway Uptown for a startlingly high price of $1,000 per square foot ($425 psf buildable) and speculated that the buyer may not know of the residential restrictions in the zone. Turns out he or she may have recognized, before many locals, the potential of high-value strata office space.
Major Point: Strata offices make a lot of sense to Vancouver-area owner-occupiers because they can buy with very low interest rates, benefit from appreciation of the property and save on leasing costs. Investors in strata offices have to more careful: Prime office space leases for around $22 to $25 per square foot, annually, which can make it harder to cash flow positively when prices approach residential condominium levels. In addition, if you lose a tenant it can be harder to replace than with a residential unit. Still, we believe strata commercial has a bright future and investors should be aware of its potential.
Mix Vancouver Homes With Industrial, Architect Urges
At an address April 6 to a packed crowd at SFU’s Harbour Centre, architect and developer Michael Geller presented a dozen ideas to create more affordable housing in Vancouver. Ten of them were concepts that have spun for years with limited traction: subdividing corner lots to allow smaller houses; adding density to old public and housing projects; building on the rooftops of older apartments; using pre-fabricated modular housing; stacking transport containers into multi-level apartment projects; and allowing more float homes. But one idea from the SFU adjunct professor may make a lot of sense: higher density housing mixed with industrial projects.
You have to realize first of all that industrial today is different: making video games or apps is now akin to manufacturing auto parts or tools, but a lot less noisy and dirty. Geller pointed to a 1980s downtown Vancouver zoning policy that allowed residential development on the upper floors of office buildings, provided the amount of office space be increased. This ‘4+1+1’ zoning provision allows an extra 1 FSR of housing, in return for an additional 1 FSR of office. That concept could be used, Geller said, to add housing to light industrial development. Where?
Major Point: The Mount Pleasant area and South West Marine Drive industrial zones are the prime areas.
Foreign Ownership Survey Still Lacks Credibility
Canada Mortgage and Housing Corp. released a survey of property managers last week that found only 3.5% of Metro Vancouver condominiums – and 3.3% in Toronto – are owned by foreign investors. In downtown Vancouver, CMHC says, just 5.4% of condominiums are owned by foreign buyers. Sure.
The survey, which noted that foreign ownership in Vancouver had risen from 2.3% in 2014, still lacks credibility. Talk to condominium developers in Vancouver, Burnaby, and Richmond and, lately, in Coquitlam and you discover that many are marketing hard in China and count on foreign buyers to fill buildings. Realtors and vendors are also very aware of where much of the money is coming from. In Metro Vancouver, with a large and growing Asian population, it is nearly impossible to separate local and foreign buyers, but there is overwhelming anecdotal evidence of the power of foreign capital in driving Vancouver condominium prices higher. In fact, the level of Asian investment is the only way to explain why home prices in Vancouver are twice as high as in Toronto and increased five times faster in the last year than in the rest of Canada.
CMHC’S report concluded that more information is needed. Next steps will include surveying realtors, developers and banks, and pulling data from municipal land registries to get a handle on foreign buyers. “A lack of accurate and reliable data makes it difficult to determine if or how foreign ownership may be affecting the market,” CMHC president and CEO Evan Siddall said in a speech last Thursday in Montreal. Offshore buyers can keep their location and identity secret, Siddall conceded.
Major Point: A Sotheby’s survey of realtors in 2013 found that international buyers made up 40% of luxury sales in Vancouver and a quarter in Toronto. Since then foreign ownership has increased due to the plunging value of the Canadian dollar and the perception of the profits to be made in two of the hottest housing markets in North America. Personally, we accept that foreign buyers are a force in the Vancouver markets and see no problem with that. CMHC should be concentrating more on helping people buy homes than worrying about where they come from.
Major Point: Apples and oranges. CMHC counts all foreign ownership as a percentage of all houses in existence in Vancouver – ergo 3.5%. Who cares? What we lack is the counting of the number of total sales and what percentage of SALES are to foreigners.
Condo Investors Should Be Flipping More Than Holding
Condominium investors in Vancouver and Toronto are mostly small-scale investors holding on for the long term, not flippers. This is according to CMHC’s Condominium Owners Report, released this week.
CMHC surveyed 42,681 condominium households in Toronto and Vancouver and asked if they own a secondary condominium. It found 24.5% own at least one other condominium as an investment. The survey also says that 48.6% of condominium investors bought their unit for rental income and 59.8% expect to hold onto it for more than five years.
Only 8.4% of investors plan to own less than two years, down from 10.1% a year earlier. A year ago, only 52.6% of condominium investors planned to hold their units for more than five years.
Almost 75% of investors have only one unit and 90% of investors had no plans to buy another unit in the year following the survey.
The survey also found 56% of investors expect their units to appreciate, but 35% do not expect a significant change and 5% suspect the value will drop. More half – 53% – had a mortgage on their investment condominium.
Major Point: The survey shows that condominium investors, at least in Vancouver, may be missing out by not flipping their units, rather than renting them out. Take the West Side of Vancouver as just one example. In the past year, the MLS benchmark price of a condominium apartment has increased 23.4% and in seven neighbourhood prices have soared more than 30% and risen by more than 3% in the past three months. Based on current prices of $635,300 per condominium, this means that a condominium flipper could have grossed from $152,000 to $190,000 in the past 12 months and from $15,000 to $20,000 since December. At the same time, it is very hard to receive positive cash flow on a Vancouver rental condominium. We are surprised that there is not more condo-flipping going on in Vancouver.
Prince George, Prince Rupert Among Few Rising Markets In North
The ‘northern capital’ of B.C., Prince George is among the few northern cities seeing both higher house prices and sales this year. During the first quarter of this year, detached house sales in Prince George increased to 185 units, compared to 167 in the first three months of last year, and average price rose by about $20,000 to $293,577.
So how are the smaller centres that are forecast to lead the new liquefied natural gas (LNG) industry doing? It is mixed.
In Prince Rupert, which is also touted as the site of a new LNG export terminal, the average house price is now $293,000, up more than $100,000 from two years ago and about $60,000 higher than a year ago, when the average was $238,400.
In Fort St. John, the north’s second-largest city and a key natural gas drilling area, detached sales fell to 23 units in the first quarter. This compares with 59 sales in the 1Q of 2015 and 72 sales during the first three months of 2014. The average house price is now $401, 500, down from $416,500 a year ago (but up from $391,000 in 2014.)
Kitimat house sales are also down marginally (13 sales in the 1Q of 2016 compared to 25 in 1Q 2014 and 14 in 1Q 2015), but the average house price has increased about 15% from last year, to $354,900, reports the BC Northern Real Estate Board..
Terrace, a key service centre in the northwest, is holding its own. Average detached house prices this year are up about 8% from 2015, to $301, 500, but sales, at 29 units, are down marginally from 2015 and down sharply from the 43 houses sold during the first three months of 2014.
Major Point: If investing in northern B.C. housing – our 2015 and 2016 recommendation of Prince George is the best bet. The city has around 88,000 people, a diversified economy, a deep rental pool, and house prices that are lower than in smaller northern cities. In Prince George, it takes only 28% of average income to buy a detached house, compared to 87% in Greater Vancouver and 79% in the rest of the province. When LNG fires up – not only will Ft. St. John and Dawson Creek benefit but Prince George may gain the most because it is the de-facto service and transport hub for the north
Whistler Channels Walt Disney With Mega Project
Whistler Blackcomb is planning a renaissance over the next few years that would include real estate developments and a price tag of about $345 million. However, do not hold your breath.
The first phase of the Renaissance project would cost up to $100 million and include a year-round indoor water-based play area at Blackcomb’s upper base.
The resort would also get a new high-speed lift to connect Blackcomb’s upper and lower bases. A second phase would cost $105 million to $115 million and include the construction and sale of about 60 townhomes and Phase 3 would cost an estimated $140 million to $150 million and include further real estate development.
Whistler Blackcomb Holdings Inc. says the project requires approvals from municipal and provincial governments and successful negotiations with the Squamish and Lil’wat First Nations.
Major point: Which means it is likely a long way off.
Cuba Is Not Libra, But Real Estate Is For Sale
Can a Canadian buy real estate in Cuba? Should they?
The answer is yes and no, with qualifications. There are dozens of dilapidated apartment buildings developed 20-30 years ago in the Havana market. Foreigners are allowed to buy them. Unconfirmed reports claim those properties are being scooped up quickly.
Additionally, president Raul Castro has said his Communist government has decided to go ahead with plans to develop golf resorts and sell million-dollar-plus villas, townhouses and apartments to foreigners. It is hard to find properties for sale in Cuba, because of a lack of Internet and real estate companies. With the opening up of links with the United States, though, such developments are expected to move ahead much quicker. This link will provide more information: cubahomeforsale.com
Major Point: We included Cuba this week because of the interest from readers following President Obama’s visit to the island nation. When we checked Cuban properties being pitched to foreigners, though, we found many of the prices were unrealistically high. In any case, we do not recommend buying real estate in Cuba or really in any third-world countries. They are plenty of opportunities in safe, secure, wonderful North America (that is the North America of Canada and the US – only!)
1. Campbell River: 2 bedrooms, 2 bath 97,400;
2. Castlegar: House 2 bedrooms, 1 bath $80,500;
3. Clearwater BC: 3 bedrooms – $92,900;
4. Quesnel, 3 bed, 2 bath house, $75,000.
Contact info write to firstname.lastname@example.org
The Numbers, The Numbers
From one end of the country to the other, we have astounding real estate sales statistics.
Vancouver, The Fraser Valley and Toronto have spectacular sales gains and prices are soaring! Calgary and Edmonton are surprisingly holding in there! Listings are rising but prices are hanging in there. We expect this to change in Calgary and Edmonton and for Vancouver and Toronto to continue.
|Vancouver||March 2016||March 2015||%|
|Detached Prices New||2,077,300||1,709,600||+21%|
|Detached Prices Used||1,773,500||1,382,500||+28%|
|Condo Prices New||562,800||489,000||+15%|
|Condo Prices Used||563,700||461,100||+22%|
|Fraser Valley||March 2016||March 2015||%|
|Detached Prices New||1,010,500||890,800||+12%|
|Detached Prices Used||960,000||716,100||+34%|
|Condo Prices New||330,800||297,700||+11%|
|Condo Prices Used||248,300||211,000||+17%|
|Toronto||March 2016||March 2015||%|
|Calgary||March 2016||March 2015||%|
|Edmonton||March 2016||March 2015||%|
Edmonton Prices are UP! Not much, but up!
Summer Students For Social Media, Marketing, Events
SFU’s Communication Co-op program has summer students available to be hired with skills in social media, marketing, event planning, office administration and more. Past students have worked with the Real Estate Council of BC, the Fraser Valley Real Estate Board, and realtor groups to enhance communications or marketing initiatives. If interested, contact Liesl Jurock at SFU – email@example.com or 778-782-5542.
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To subscribe to Jurock’s Facts by Email call 1-800-691-1183 or 604-683-1111 or fax 604-683-1707. While the above information is compiled from sources believed to be reliable, its accuracy cannot be guaranteed. Any type of investing carries inherent risks; as such, JREI cannot assume responsibility for any subscriber’s actions.