The High Costs of Luxury Condo Developments

October 21, 2014

Luxury real estate. It’s a term that’s tossed around a lot, but what does it mean, and what truly is a luxury property? In Vancouver and in other pockets throughout the Lower Mainland, a host of super high-end condos are arriving on the market. But who is buying them, what are they getting, and – the multimillion-dollar question – at what cost?

“There is only so much demand for luxury properties, and it will always be limited because there are a limited number of sites where you can develop a project that can truly call itself luxury,” says Scott Brown, president of Fifth Avenue Real Estate Marketing. “Those limited number of options drive up the price, but our market is still relatively cheap compared with what you would get in London or Hong Kong for a comparable home.”

Brown cautions there are many projects that use the word luxury in their descriptions. For him, to truly be a luxury development, a home must meet certain criteria including a location with a view, generous floor space and glamorous interior finishing.

PortLiving CEO Tobi Reyes describes the luxury condo buyer as a more sophisticated purchaser. He agrees with Brown they want views, access to water and amenities. “They’re looking for more interesting design and architecture,” he said. “What land is available in Vancouver is only available because the obvious plots have already been developed. That pushes the need for unique design.”

High End Booming

In mid-September 2014, there were nine Vancouver luxury condos selling units priced at over $850 per square foot. The almost-sold-out Vancouver House, perhaps the epitome of luxury living in our city, has penthouses with record-high asking prices of over $5,000 per square foot. For an investment at that level, you have the cachet of living in a starchitect-designed home where no two units are the same, 24/7 concierge service, a wellness centre, a rooftop heated pool and access to i3 and i8 model BMWs shared by owners.

At the somewhat more affordable end of the high-end sector, PortLiving has recently made its first foray into the luxury market with its new South Creek Landing development at the south end of Cambie Bridge, which boasts huge staggered roof terraces with sweeping city views, as well as large floorplans and high-end finishes.

Trump Vancouver
The twisting tower of Trump Vancouver

And then there's the audacious, twisting Trump Vancouver, currently under construction in downtown Vancouver with pre-sales underway at prices that are only revealed to those who register and are approved by the marketing team.

Other recent examples of super-luxury developments that have sold easily include boutique downtown development Artemisia, the glamorous and curvilinear Jameson House (boasting Vancouver's first automated parking lot) and the swanky Three Harbour Green in Coal Harbour.

Clearly there's no shortage of fabulous new developments to buy into if you have the money. But of course, there are different perspectives about what you get for your cash. Frank Schliewinsky, author of the Vancouver Condo Report, says that buyers of the less expensive units on Vancouver House’s lower floors get “an excellent view of the neighbouring shoehorn housing and the traffic, noise and pollution from the Granville Street Bridge.”

Identifying the Buyers

Despite reality checks like that, the desire for unique luxury condos is undeniably high. And who are the buyers fueling this demand? That’s a sensitive topic.

“Demand is being fueled by conspicuous consumption by Chinese buyers trying to get money out of the China,” asserts Schliewinsky. “Developers won't tell but, given where the marketing is taking place, the majority of these buyers have to be coming from the Middle Kingdom.”

Artemisia hallway
The grand, undulating entrance hallway to the Artemisia building

Artemisia sales specialist Monique Davidson has a different take on who’s buying. Purchasers at this boutique residence in downtown Vancouver have mirrored who she sees as active in the overall luxury sales market.

“Luxury condo sales have done exceptionally well recently,” she says. “While purchasers vary from building to building, about a third are local buyers, another third are investors collecting trophy residences, and the final third are international users who will spend a couple months a year in Vancouver. A lot of well-to-do Vancouver baby boomers in Shaughnessy and Kerrisdale are ready to downsize and they want to live downtown.”

At PortLiving's South Creek Landing development, an overwhelming number of the 15 homes have sold to locals, with only two or three being purchased by non-Canadian residents. PortLiving did no overseas advertising and clients found out about the site through their own networks.

But Reyes does concede, “That’s atypical from what I’ve seen. Average sales to offshore buyers in this market are likely closer to 40 per cent. Our city has historically been a destination for non-Vancouverites. Whether it’s a bigger proportion today than before is anyone’s guess.”

Luxury Outside Vancouver

Given the limited amount of land available for development in Vancouver, luxury condos are starting to pop up in other municipalities including Burnaby, Surrey and White Rock. Fifth Avenue is currently marketing Royce, which offers breathtaking views of Boundary Bay.

“Our buyers are wealthy downsizers,” says Scott Brown. “Most own a large family home within 15 to 20 minutes of Royce.” About the typical buyer of luxury real estate, Brown added, “No one can say with certainty where the majority of these buyers are coming from. When you’re that affluent, you probably live in multiple cities. Many would call themselves Vancouverites. There are many older buyers who have built up their wealth in this market.”

What does all this mean to more ordinary folks who want to live in Vancouver? Schliewinsky remarked that average buyers can forget about finding affordable housing in the downtown core unless they can live in shoebox housing.

Added Reyes, “These buyers are caught in a cycle of competing for a great location with end users who can afford much more than they can. I believe there’s a place for everyone… not every space available is going to become a luxury development. The market will dictate.”