Vancouver

It’s a different world for investors. That’s the good news

Lending rules have tightened but there are still great opportunities for cash-rich investors, says real estate investment expert Frank O'Brien

By
REW.ca
November 9, 2016






New condo apartment building construction in Burnaby

Metro Vancouver condominium investors have had it good over the past two years. Historically low mortgage rates. Fairly easy financing. Price increases that have averaged more than 25 per cent annually and high demand for rentals made condominium apartments a near no-brainer investment play.

Well, the environment has changed and investors now have to operate in a much more disciplined and risky market. That is good news.

What’s Changed?

The change started in May when the provincial government virtually banned assignment sales on resale housing. Vancouver condo sales immediately dropped 20 per cent from a month earlier.

Then came the 15 per cent foreign buyer tax in August, followed in October by restrictions on buyers purchasing with mortgage insurance, which includes many first-time buyers. By now condominium sales across Metro Vancouver were down 30 per cent to 45 per cent from 2015 and we were seeing the first downward price corrections since 2013.

Yet, for investors with the financial muscle, this is the type of condominium market they have been waiting for. Multiple bids on choice properties are rare, there are more listings on the market, and vendors are suddenly more open to negotiations on subjects and price.

While not technically a buyer’s market in every part of Metro Vancouver, the advantage has certainly tilted in the buyer’s favour.

Where to Invest

What investors have to look for now is condominium markets that have remained robust and where there is strong upside potential for rentals and appreciation. It will take some months, likely until early next spring, before the condominium market returns to the robust sales we saw earlier this year. This opens a window for buyers capable of purchasing without the need for mortgage insurance.

Prime areas to be buying in now are Burnaby and New Westminster. This zone has emerged as the biggest condo market in Metro Vancouver and has sterling potential.

The nearly 3,200 sales in the area is second only to the west side of Vancouver, but the typical price, at $440,000, is $200,000 less. This year more condominiums have started in Burnaby than in any other BC municipality. New Westminster has had more condo starts than the city of Vancouver.

The opening of the SkyTrain extension this year benefits both Burnaby and New Westminster, which already have multiple rapid transit stations. Also, the rental vacancy rate for condominiums is around 0.7 per cent.

And prices are low.

Since August, more than 70 buyers have purchased a condominium apartment in Burnaby or New Westminster for less than $250,000 and twice that many have purchased for $300,000 or less.

Best advice in this changing environment: pick your target, negotiate hard on price, come in with the largest down payment possible – and don’t let the negative news distract you from what is still Canada’s No. 1 condominium market.


Frank O'Brien is the editor of Western Canada's biggest commercial real estate newspaper, Western Investor, as well as a contributing editor at West Coast Condominium, real estate contributor to Business in Vancouver and a regular media commentator on real estate investment.
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