The week’s top stories touch on both commercial and residential real estate markets in B.C. On both sides, sale slowed, however, for very different reason. On the commercial end, sales have slowed due to lack of availability, while sales on the residential side are suffering from a glut of inventory. In both sectors, suburban submarkets continue to perform well.
Here is Western Investor’s pick of the most buzzworthy real estate stories published this week.
Office sales are the positive outlier in a quarter of declining sales volume and velocity, according to a new report.
Greater Vancouver office sales are remaining strong amidst an overall lag in commercial sales value, according to a new 2019 Q1 investment report.
Sales values are down 49 per cent in the first quarter of 2019 as compared to the same period last year, totaling $1.58 billion. Sales velocity also slowed considerably, down 36 per cent from the year prior. Three hundred and twenty-two transactions mark the lowest sales volume in 18 quarters, according to Altus Group's report.
“The lowest transaction volume since Q1 2013 is reflective of the gap between vendor and purchaser price expectations, the lack of product and has resulted in decreased market activity,” said Paul Richter, director of data solutions at Altus Group.
The industrial sector posted the strongest sales value decline, down 54 per cent from the fourth quarter of 2018 to $228 million. Just 40 sales took place, versus 70 last quarter. The decline is more to do with a lack of availability rather than a decline in sales or prices. Prices increased 5 per cent over the quarter, to an average of $399 per square foot.
Retail saw its second consecutive decrease in investment, posting 35 sales worth $136 million in Q1 2019, down 47 per cent in dollar volume from last quarter and 78 per cent year-over-year. However, Altus reports that despite the two-quarter slump, capitalization rates are expected to level out moving forward following a period of flight compression.
Vancouver’s office sector remains the outlier, recording the only increase in sales and dollar volume this quarter. Twenty-six sales took place this quarter, up from 16 the quarter prior and 13 during the same time last year. Two suburban office transactions accounted for approximately $303 million of the $395 million traded in the office market, vaulted the sector’s dollar value by 639 per cent from the previous quarter and 221 per cent year-over-year.
“This was the strongest quarter for Vancouver’s office market since Q1, driven by key transactions as well as new, centrally-located, high-end strata projects,” the reports reads.
Typically Greater Vancouver’s strongest performing sector, residential land market sales dipped under the $1 billion mark for the first time in 13 quarters to $446 million. This was the sector’s transaction volume since Q2 2014. This represents a decrease of 68 per cent in dollar volume from the previous quarter and 66 per cent year-over-year.
Resale activity still nearly seven per cent lower than same month last year, reports board – and lowest May sales total in 19 years.
After a dismal spring so far, Metro Vancouver residential real estate activity leaped by 44.2 per cent month over month to 2,638 homes sold in May, according to figures released June 4 by the Real Estate Board of Greater Vancouver (REBGV).
However, May is historically the busiest month of the year for home sales, and last month’s jump was from very low April figures. May’s transaction total is still 6.9 per cent lower than in May 2018, 22.9 per cent below the 10-year average for the month and the lowest May total since 2000.
Still, the new figures do mark a notable improvement over the 29.1 per cent annual sales drop seen in April 2019, which was 43.1 per cent below April’s 10-year average.
The board maintained its stance of attributing low demand to the mortgage stress test. “High home prices and mortgage qualification issues caused by the federal government’s B20 stress test remain significant factors behind the reduced demand that the market is experiencing today,” said Ashley Smith, REBGV president.
Despite the increased sales activity in May, it was not enough to offset all the new listings coming on to the market, and inventory continues to pile up. There were 5,861 homes newly listed last month, which is 8.1 per cent less than May 2018 but a 2.1 per cent increase compared with April. It’s also more than double the number of homes sold last month.
The total number of homes listed for sale on Metro Vancouver’s MLS is 14,685, a 30 per cent increase compared with May 2018 and up 2.3 per cent since April 2019. This is the highest number of homes listed for sale since September 2014, said the board.
However, the improved absorption rate meant that Metro Vancouver stayed firmly in a balanced market in May. For all property types, the sales-to-active listings ratio for May 2019 is 18 per cent. When broken down by property type, the ratio is 14.2 per cent for detached homes (returning to a balanced market, if maintained for several months), 20 per cent for townhomes and 21.2 per cent for apartments (both edging back toward seller’s markets, but again, only if this ratio is sustained).
Despite this, the generous supply of homes for buyers to choose from is pulling prices down, with the composite benchmark price of a home (all property types combined) across Metro Vancouver now at $1,006,400. This is an 8.9 per cent drop since May 2018, and a slim 0.4 per cent decline compared with April 2019.
Smith added, “Whether you’re a buyer looking to make an offer or a seller looking to list your home, getting your pricing right is the key in today’s market.”
Hot spots within New West, North Van, Richmond, Burnaby and PoCo make MoneySense’s top 5 in ranking of up-and-coming sub-markets.
Whether it’s a neighbourhood that’s up and coming, or one that will always be desirable, there are many good reasons to invest in a home in certain hot spots – even in a down market. But sometimes, identifying those hot areas can be tricky.
MoneySense magazine this week published a ranking of what it deemed to be the best Lower Mainland neighbourhoods to buy a home in right now.
Its study, which covers 252 neighbourhoods across the region, examined the current average home price in each neighbourhood, how that price compares with both the surrounding area and the region as a whole ("value"), how much the average price has increased over the past year and five years ("momentum"), and what local realtors had to say about the area's potential. It then created a star rating for each neighbourhood and ranked them.
MoneySense found that Uptown New Westminster was the hottest market in the Lower Mainland right now, followed by Lynnmour in North Vancouver, Sea Island in Richmond, Greentree Village in Burnaby and Birchland Manor in Port Coquitlam.
The hottest Vancouver neighbourhood was found to be Marpole, which came in overall at number 18 on the list.
The lease is for an under-construction building downtown.
Woodfibre LNG has confirmed to The Chief that the company has secured housing for its workers in one of the three Sirocco buildings currently under construction.
“Woodfibre LNG recently became aware of an opportunity to lease one of the buildings in the Sirocco development that was nearing completion and therefore would be available for site staff and their families," said Rebecca Scott, director of communications for Woodfibre.
Woodfibre LNG is leasing one building.
"Recognizing that rental vacancy rates in Squamish are amongst the lowest in the province, we are very aware of our potential impact on housing availability for Squamish residents. The lease allows us to provide some accommodation options that won’t remove any existing rental capacity from the market. While we can’t avoid all impacts, we can aim to make them the least disruptive possible. Leasing a portion of the Sirocco development is in our view the best opportunity toward that goal for the Squamish community.”
My Sea to Sky's Tracey Saxby said that this situation highlights one of the problems with the provincial Environmental Assessment process.
"Woodfibre LNG's environmental assessment said that there wasn't going to be a problem of adding 500 construction workers in town, in Squamish, but we have had a housing affordability crisis for five years," she said. "So while we were going through that process, and they knew there was a housing affordability crisis, the EA said there wasn't an issue."
My Sea to Sky has also called for the Environmental Assessment Office to suspend the environmental certificates of Woodfibre LNG and FortisBC until they have "properly assessed" the proposal of a workcamp at Britannia Beach.
The solution Saxby and My Sea to Sky has put forward is a floating workcamp near the Woodfibre LNG site.
"Where the workers are far way from Squamish, far away from the communities around Howe Sound. They are located at the site. We think that would be a better solution all around," she said.