As seen in...
This spring, an 88-year-old teardown house in Vancouver’s Point Grey sold for $9 million, more than one million dollars over the asking price.
Across most of Metro Vancouver, many older detached houses on even small lots can sell for $1.5 million, yet are soon demolished.
It is all about the land value, of course, not about the building. So, if a single house on a 33-foot lot is worth that much, how much is a home sharing an acre worth?
We are about to find out as, for the first time, owners of old townhouses get a better chance to cash in on the value of the land beneath their floor. Get used to the term “townhouse teardown.”
Change Fueled by Change to Strata Property Act
The reason is a transformative change in B.C.’s Strata Property Act that now makes it easier for strata owners to vote to disband their strata corporation, and sell the entire complex to a developer.
When the change was first made, it was suspected that owners in older condominium apartment buildings, especially those facing higher and increasing maintenance costs, would be the main beneficiaries.
But I believe the biggest potential is for townhouse owners. When the first townhouses were built in Vancouver four decades ago, they were competing with detached houses. This means larger lots with lower density and often in prime locations, such as close to hospitals, transit improvements or parks. As well, townhouses are almost invariably constructed in wood, which makes a two-storey project much easier to tear down than a concrete condo tower.
The lower density also means there can be less than two dozen owners in older townhouse projects, some of which can sprawl over half a city block.
But a dilapidated bungalow on the same street is often worth more than twice the price of a larger, nicer and newer townhouse, because strata owners could only access the value of their unit, not the land value.
The new rules change that. In a 20-unit townhouse project, just 16 people can vote to sell the entire property. There are reports of developers offering such owners two to three times the unit’s appraised value.
Cashing In on Allowances for Increased Density
If you own a townhouse unit in an older complex, investigate the land values in your neighbourhood and apply it against the size of your development. Find out about recent density zoning in the area. If it is higher than the existing floor/space ratio of your project, the potential land value could be much higher than you suspect. Then, meet with your fellow owners and talk strategy.
Townhouse teardowns should be a welcome development. They will allow construction of better and more homes, expand the tax base and community amenities and, most importantly, allow many owners to finally realize the full value of the property.