Land rush over
Vancouver residential land rush may be over as housing market slows
All signs point to the end of the residential land rush in the Lower Mainland, according to a presentation given by the Urban Development Institute
Land rush over
All signs point to the end of the residential land rush in the Lower Mainland – though Michael Ferreira of market research firm Urban Analytics Inc. didn’t use those exact words in his presentation last week to the Urban Development Institute (UDI).
Toronto real estate consultancy Altus Group Ltd. reports that Metro Vancouver residential land deals worth $1 million and up stayed even at $2.9 billion in the first six months of both 2017 and 2018. The number of transactions in the period increased by five, from 438 last year to 443 in 2018.
The value was enough to make land deals the top asset class for investment, but Ferreira drilled down into the trends for residential sites and pointed to lower values and volumes.
Vancouver, for instance, saw 17 fewer land transactions in 2018’s first eight months versus the same period a year ago. The deals totalled 22 per cent less than those in 2017. North Vancouver saw an even more dramatic drop, with 42 fewer land deals and a 57 per cent drop in the aggregate value.
Moreover, buyers are being given more time to undertake due diligence and speculators are dropping out of the market.
The one exception to the rule – also noted by Altus Group – is the appetite for transit-oriented sites. “The continued acquisition of residential development sites near transit hubs” was an underlying thread in activity Altus Group tracked. The trend bore itself out for Ferreira in stronger activity in Coquitlam, which has opened up thanks to the Evergreen rapid transit line. The municipality saw an additional 12 deals in 2018’s first eight months versus a year earlier, while deal values climbed 78 per cent.
A year ago, Ferreira kicked off his state of the market address to UDI members warning of buyer fatigue as pricing for new residential units sailed past $3,000 a square foot downtown, $1,500 in Mount Pleasant, $1,100 in Metrotown and $750 in Surrey (“of all places”).
Sensing a slowdown in the market – one Ferreira expects could extend into 2020 – he spoke of a time 10 years ago when the approaching financial crisis nixed the launch of a Yaletown condo tower priced at $900 a square foot.
“[It] would be considered cheap in today’s market,” he said.
Nevertheless, developers appear to have been taking heed of slower sales driven by taxed and stress-tested buyers, and prices that have continued to defy government moves to keep them in check.
With markets finding their ceiling, some developers, Ferreira said, have resumed offering buyers and even realtors incentives to encourage deal-making for the first time in four or five years.
Onni Group, for example, saw pricing in the Brentwood area peaking at $1,100 a square foot and instead opted to bring the first tower of its Gilmore Place development on the market at $1,000 a square foot and create enthusiasm for the project before gently moving up pricing with the second and third towers.
Similarly, Cressey Development Corp. initially priced its Chelsea project in the Cambie corridor at $1,500 a square foot to develop the momentum needed to bring final sales closer to the neighbourhood peak of $1,600 a square foot.
“There needs to be some caution in terms of not trying to push that price too high and too far beyond what the market is prepared to pay,” Ferreira cautioned last year.
With government levies and land and construction costs keeping prices high, it’s one price developers are willing to pay to keep buyers, who remain short of options and cash, in the game and product moving.
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