The week’s top stories focus primarily on Vancouver housing sales and supply and land transactions. While home sales have slowed considerably and the detached market has entered a buyer’s market for the first time in years, residential land sales for redevelopment continue to be in high demand. Meanwhile, Western Investor editor Frank O’Brien takes a look at Manitoba’s underrated economic potential.
Here is Western Investor's pick of the most-buzzworthy commercial real estate stories published this week.
West Side houses see prices slide, but townhome and condo values remain elevated on limited supply.
The detached-home pendulum has swung into a buyer’s market, according to the monthly stats report from the Real Estate Board of Greater Vancouver (REBGV), released July 4.
REBGV said that slow sales, combined with an increase in home listings, have pushed the region's sales-to-listings ratio in the single-family sector down to 11.6 per cent. This is creeping into buyer’s market territory, as a balanced market is between 12 and 20 per cent.
Phil Moore, REBGV president, said. “With reduced demand, detached homes are entering a buyers’ market. This is allowing the supply of homes for sale to accumulate to levels we haven’t seen in the last few years. Rising interest rates, high prices and more restrictive mortgage requirements are among the factors dampening home buyer activity today.”
Supply improved in townhomes and condos, too, but not enough to take those sectors into a balanced market. At ratios of 24.9 per cent for townhomes and 33.4 per cent for condominiums, both housing types are still defined as seller’s markets, although less aggressively than in recent history.
Overall, MLS home sales in the region totalled 2,425 in June, a 37.7 per cent drop from June 2017, and a 14.4 per cent fall in just a month since the slight peak in May 2018. Last month’s transaction total was 28.7 per cent below the 10-year June sales average, and the lowest June total since 2012.
The sales slowdown is putting the brakes on overall price increases, with June’s composite benchmark price (all home types combined) 9.5 per cent higher than a year ago, but virtually flat compared with May 2018, at $1,093,600. However, this price change is very different when broken out by home type (see below).
It also masks wide variations between cities and neighbourhoods within the REBGV region. For example, composite benchmark prices in Whistler, Squamish, New Westminster and Pitt Meadows are all up more than 20 per cent year over year, whereas West Vancouver home prices are typically 4.3 per cent lower than a year ago.
Fraser Valley sees a surge of residential and industrial land speculation despite cooling property markets.
A Fraser Valley land rush that has driven prices up three fold in the last two years has helped make land the dominant real estate investment in the Lower Mainland.
In the first quarter of this year, land accounted for 56.8 per cent of all the property transactions in the Lower Mainland, according to the Altus Group, with sales of residential development land alone worth more than $1.1 billion. Sales of non-residential land, primarily for industrial, tallied another $530 million in the three-month period.
But, as reflected in slumping housing sales, residential land sales in the Lower Mainland were down 46 per cent from the fourth quarter of 2017 and down 21 per cent from the white-hot pace in the first quarter of last year.
Fraser Valley home sales plunged 43.5 per cent in June compared with the same month a year earlier and were down 17.4 per cent from May of this year, according to the Fraser Valley Real Estate Board.
Sales of non-residential land also cooled in the first three months of this year, dropping 15 per cent from the fourth quarter of 2017 and 9 per cent below the first quarter of 2017.
Yet, with land sales averaging nearly $500 million a month so far this year, any talk of a downturn appears premature, especially in the Fraser Valley.
“The Fraser Valley is the future,” said Joe Varing, director of sales for Abbotsford-based Varing Marketing Group, with Homelife Glenayre Realty Company Ltd.
Varing specializes in land sales and, despite continual warnings of a land shortage, maintains there are plenty of shovel-ready residential parcels in the Fraser Valley.
Varing estimates valley land prices have tripled since 2016, which has convinced some owners of detached houses to join with adjacent neighbours in land assemblies. One recent example in the Yorkson area of Langley saw three lots assembled into a 3.6-acre parcel that sold for $8.3 million.
The planned extension of light rapid transit, Varing said, has boosted demand for land assemblies from central Surrey to Langley. Developers are land-banking on speculation, he said, and looking forward three to seven years for new multi-unit residential projects.
Investor demand for Fraser Valley industrial land is also ramping up, according to Avison Young.
More than 1.9 million square feet of speculative industrial construction is set for delivery in the Fraser Valley over the next 12 months, Avison Young confirms – and the speculators are willing to pay big money to get into the market.
The University of Victoria wants to turn a downtown heritage building that once housed a brothel into condos and housing for graduate students, Times Colonist reports.
The Duck’s Building, at 1316 Broad St., would be redeveloped as a five-storey building with 59 units of housing, where UVic graduate students would be given preference as tenants. On each side of the Duck’s Building would be two seven-storey buildings with a total of 104 condo units to be sold at market value.
UVic has entered a partnership with Chard Development. An application for rezoning the commercial building into residential was made last month and is under consideration at Victoria City Hall.
The Duck’s Building — dating to 1892 — along with several other downtown properties, came under UVic’s ownership in 2000 when local businessman Michael Williams died and left them to the university in his will.
Williams had been a longtime Victoria property developer and an early specialist in re-purposing heritage buildings, most notably Swan’s Hotel and Brew Pub — formerly a warehouse — which also passed to UVic.
Peter Kuran, president and CEO of UVic Properties, said the design of the new buildings will pay respect to the history and heritage of the Duck’s Building, keeping the front facade and exposing a rubble wall currently hidden by adjacent structures.
“It will still very much preserve that Old Town feel,” Kuran said.
He said the building proposal has gone through at least two city committees so far, including the Heritage Advisory Panel, and it’s hoped it can go before city council’s committee of the whole this summer.
Coun. Pam Madoff, a longtime supporter of heritage preservation, said she has not been impressed so far with proposals for the Duck’s Building.
“It looks to me like a facade enveloped by new construction,” Madoff said. “There’s nothing wrong with new construction, but what they are proposing is nothing very new or exciting for Old Town.”
She said that the approach of the designers seemed to indicate they regarded heritage as a nuisance to be managed instead of a reason why the properties should be re-purposed. At one point, in a committee meeting, it was referred to as “the Lame Duck Building.”
“This approach doesn’t make very much sense in terms of what Michael [Williams] stood for,” Madoff said. “You look at what he did in Old Town and it’s nothing like what they are proposing.”
She said she thought other councillors might be overly excited by the thought of attracting graduate students as a demographic to live downtown.
She noted, and Kuran agreed, that once graduate students have taken up tenancy, they can’t be evicted once they cease to be students.
Under provincial landlord and tenant rules, the only way they can be evicted is for failure to pay rent or for being bad tenants. So the units might end up occupied by people who have no connection to the university.
“It’s all been a bit misleading since it’s been presented on the notion of bringing UVic students downtown and building on the city’s desire to have a UVic presence downtown,” Madoff said.
“What we are really getting is market condos and one building that may or may not have some connection to students,” she said.
The central province's commercial real estate eclipses larger markets and house prices are among the most affordable, Frank O’Brien comments.
This year the upstart Winnipeg Jets were the only Canadian team in years to get deep into the Stanley Cup playoffs, but Manitoba has quietly been posting a number of firsts recently.
Canada’s central province is often overlooked and underrated.
Flanked this spring by the histrionics of the Ontario provincial election on one side and the hysteria of an interprovincial pipeline battle on the other, Manitoba was perhaps grateful to be running under the radar.
But the province has a right to voice more “white noise” cheers, as detailed in a provincial economic report released in May.
The report noted that Manitoba leads the country with a near 40 per cent increase in auto sales this year. It is also No. 1 in farm cash receipts, which increased 8.8 per cent in 2017 to a record $6.5 billion. Manitoba farmers set a record in major crop production last year, with crop receipts up 8.8 per cent from a year earlier.
In the mining sector, Manitoba increased gold production by nearly 21 per cent in the first two months of this year.
Manitoba’s real GDP is forecast to grow by 2 per cent this year, just slightly off the national GDP pace.
And, to top it all off, Manitoba’s population has increased to 1.34 million and, for first time, its working-age population has surpassed one million. A big reason for the population increase is in-migration. Last year an average of more than 1,000 people moved into Manitoba, most of them from foreign countries.
“As its two Prairie neighbours rebound from a deep trough caused by the collapse of commodity prices in the carbon-based sector as well as the potash industry, the diversified and stable Manitoba economy continues to make headway and is expected to stay among the provincial leaders,” noted the Conference Board of Canada in its 2018 outlook for provincial economies.
As for real estate, Winnipeg – which accounts for 62 per cent of Manitoba’s population – has the second-lowest downtown office vacancy rate among western Canadian cities at 8.8 per cent.
Winnipeg’s industrial market has seen vacancy rates fall to 2.9 per cent, the lowest level in five years. At the same time, net absorption and average net rents are both ramping higher.
In the multi-family rental sector, Winnipeg has a healthy vacancy rate of 2.8 per cent, the average rent for a two-bedroom is $1,100 and investors can still find apartment buildings for $100,000 a door.
For those in Vancouver wondering how they will ever afford a home, Winnipeg could be a viable option. The average price of a nice detached house in the Manitoba capital is $326,000, among the lowest of any major city.