Surrey has emerged as the big winner from the pandemic real estate boom, becoming a distinct market with local investors dominating transactions.
“We’re seeing projects in Surrey able to achieve a higher number than they might have before simply because they buyer dynamic has changed,” said Michael Ferreira, principal with Zonda Urban, in a presentation to the Urban Development Institute, Pacific Region on May 26. “It’s really matured to the point where [the question] is, what are buyers in Surrey willing to pay and how do they value the product that they see in that market?”
Buyers have been so keen on local product that some highrise projects are now launching at prices in excess of $1,100 a square foot. The regional average is $1,200 a square foot.
“We went from about $830 a foot in late 2020 … to now selling for over $1,100 a foot for concrete highrise,” Ferreira said.
Woodframe projects are debuting at $920 a square foot, up from the low $700s a year ago. Townhomes have nearly doubled to $1.1 million from $600,000 a square foot over the same period.
While the escalating prices may give investors pause and ultimately undercut market momentum, Surrey has firmly come into its own. Pricing dynamics have largely decoupled from what’s taking place in Burnaby or New Westminster.
While the dominant story of the pandemic was how apartment dwellers left the cities during the pandemic for more spacious digs after being sent home from the office for the duration of the pandemic, the lesser-told story was how local investors jumped in as the housing market took off.
“We saw investors really get involved in the Fraser Valley market. And it was a little bit different than what we’ve seen before, where we would see investors who maybe couldn’t afford product or couldn’t get into a project in Metrotown or … Brentwood or some other part of the market,” Ferreira explained. “This time around this was all Surrey-driven. … Because these buyers and investors were all from Surrey, they don’t care what’s happening in Metrotown or Brentwood.”
Moreover, the majority didn’t buy with the intention of a short-term hold or assigning the contract.
“They’re actually putting their money where their mouth is, and they’re holding onto these units. They’re deciding to keep them, either have a family member living in them or rent them out,” Ferreira said.
The decision to stand fast was affirmed when UBC Properties Trust paid $70 million last fall for a 135,000-square foot site at King George Blvd. and Fraser Highway. Currently home to Grace Hanin Community Church, the site will be developed with residential and commercial space and generate funds for a future UBC campus in the city.
While other markets benefitted from investor activity, rising interest rates and economic uncertainties gave the Lower Mainland market reason to pause at the end of the first quarter. All signs point to the second quarter being slower.
Nevertheless, upward pressure remains due to the lack of finished units available for sale.
“The overwhelming majority of unsold inventory that we have in the market is the presale, preconstruction phase, and of that product that’s in the under-construction phase, it’s about half of what we saw at the end of 2021,” Ferreira said.