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Residential investment spotlight #3: Port Moody

Flippers should proceed with caution in this hot-ticket city, but what about long-term investors?


In the third of our residential investment articles (previously focusing on Mount Pleasant and New Westminster), it’s timely to take a look at the rapidly developing city of Port Moody.

Once a largely industrial area, Port Moody is coming of age – particularly with the recent arrival of the Evergreen Line, giving the region a much-needed, regular, rapid transit link. As a recent Western Investor story sets out, the SkyTrain line is a game-changer for this waterfront city, and new developments have been springing up, and continue to do so, in close proximity to the line as the area’s popularity rises.

If all the redevelopment proposals to turn former industrial lands into high-density residential neighbourhoods are approved, Port Moody’s population of 33,500 would increase by 13,000 to 15,000 residents. And the council is certainly gung-ho on new development. As my colleague Frank O’Brien writes, “In a single week in June it was handling 30 development applications, 23 of which were in Moody Centre, the SkyTrain’s eastern terminus and where the city is encouraging narrower housing lots. Most developer applications are rezoning bids for higher-density residential.”

The excitement about this city has resulted in the past year or so in home prices escalating rapidly. Those savvy enough to invest in Port Moody real estate five years ago have seen the benchmark price of a home (all property types) rise 65.5% to $858,000. And attached-unit investors buying two years ago have watched their property rise in value by 39% from a median $404,800 in June 2015 to $562,450 this June (see infographic below).

Short-term caution

Of course, that’s great if you’re already in the market, but how does Port Moody shape up as a future investment spot? There’s the rub.

With so much residential development going on to meet the newly created demand, the question becomes whether demand will turn out to absorb all that new supply. There’s a reason condo prices in the TriCities region were so flat for so long until a few years ago – there was too much inventory. Now that the Evergreen Line is in place, yes, demand is hot again. But how sure are we that 15,000 new people will come to live in Port Moody?

A fly in that ointment could be the massive residential development going on in Brentwood. Fifteen minutes closer to downtown Vancouver via SkyTrain, Brentwood’s many huge proposed high-rises just might suck up a lot of the demand from folk looking for a commutable new home, and reduce need for all those new Port Moody units – at least in the short term. With Port Moody prices having already risen significantly, all that supply coming on stream, and no new major local employers or industries emerging in the area, any rapid-home-price-growth hopes could be dampened in the coming few years.

Cash-flow considerations

For longer-term investors, however, Port Moody is probably as good a bet as any area. With the overall Metro Vancouver population forecast to grow exponentially, any attractive city – especially one with waterfront and an appealing lifestyle – that has decent transit connections will be in very high demand over the next decade or two. Add to that all the new population and associated business and culture they will bring, even if gradually, and the long-term future looks bright for this city.

So with that in mind, how easy would it be to cash flow a unit in Port Moody? Condo inventory tends towards a larger size than Vancouver, with most available units boasting two bedrooms. That median June 2017 sale price of $562,450 should buy you a great two-bed, 850-square-foot, new-ish unit that would rent out for around $1,900. You’d need around $250,000 up front, 45%, to make the monthly repayments work with your additional expenses, however.

At 1.7%, rental vacancies in the TriCities are a little more relaxed than Vancouver’s, but still tight. That is likely to be tighter in Port Moody, the arguably most desirable of the three cities. With more and more people coming to the city to live, and those new residential masterplans still several years away, now could be the time to invest in a buy-and-hold unit in Port Moody.