By Frank O'Brien
Metro Vancouver's startling multi-family land prices are creating a “disconnect” in a high-rise condominium market that increasingly must rely on immigrant buyers to survive, according to a noted real estate consultant.
“Without Chinese buyers, there won't be much local demand to support the Vancouver high-rise market,” said Frank Schliewinsky, principal of Strategics Marketing, which publishes the Vancouver Condo Report, a long-running industry newsletter.
A recent study shows that, at current “buildable-per-square-foot” prices, a typical new 750-square-foot condo has to have a baseline price of $112,000 just to cover land costs. On the West Side of Vancouver the same price is closer to $187,000, according to numbers provided in Colliers International’s recent Land Share report.
The report calculated what Metro Vancouver developers are paying for multi-family land based on the allowable floor space ratio (FSR), basically how much residential real estate can be achieved on the land.
As an example, Care Pacific Holdings Ltd. paid $13.9 million this year for a 36,000 square feet (0.8 acre) site on King Edward Avenue in Vancouver’s Kitsilano neighbourhood. The site has a 1.75 FSR, equating to a cost of $220 per buildable square foot, before any construction, finishing or marketing of the site is even started. In downtown Vancouver, such prices approach $250 and average more than $150 in East Vancouver.
This level of prices exposes a disconnect from the Vancouver economy, Schliewinsky warns. “ In the past year, the new high-rise condo market has shifted so much away from its historical basis that it really can't be considered as a ‘Vancouver’ housing market anymore,” he said.
Over the past 12 months the average asking price for new high-rise condos in Metro Vancouver has increased by 26 per cent and the average price per square foot by 16 per cent, according to Strategics. And, based on what developers are paying for land, future condominium prices appear destined to keep rising.
Yet “[there has been] no big increase in average household income,” Schliewinsky said.
In fact, Vancouver ranks dead last in median incomes for university-educated workers among Canada’s 10 largest cities, according to Statistics Canada. The median income for a Vancouverite with a university bachelor degree is $41,981 compared to a Canadian average of $50,981.
Strategics and MPC Intelligence, which also tracks new condominium developments, report that 27 high-rise projects began marketing in Metro Vancouver this year, with an average price north of $625,000 per unit.
“Based in interviews with sales staff in these projects, 60 per cent are targeting investors and 70 per cent are targeting immigrant buyers,” Schliewinsky said. At the end of September, there were an 5,600 unsold high-rise units in new projects and another 1,460 units still to be released in projects now marketing, according to Strategics.
