When a 300-square-foot house hit the market in Toronto last year at an asking price of $179,000, it was an instant media sensation.
Yes, it was outrageous. But here in Vancouver, we’d call it a model of density and we’d pay a premium for it. A recent Century 21 Canada survey touted a 412-square-foot one-bedroom downtown condo as just the thing for first-time homebuyers. The price? A mere $281,000, or $682 a square foot. The Toronto shoebox? Just $596 a square foot.
Based on a five-per-cent down payment of $14,050 and a standard 25-year amortization period, Century 21 Canada Ltd. Partnership pegged monthly mortgage payments for the cramped condo at $1,706.
With larger two-bedroom apartments renting for an average of $1,300, chances are economically minded thirtysomethings won’t be buying cramped one-bedroom apartments in the city; they can build equity in greater comfort elsewhere. By any traditional measure, the “affordable” home in Vancouver is gone. But deals are still to be had for those with money and the will to move east of Boundary Road.
More transit connections have opened up areas that would have been out of the question for many buyers 10 or even five years ago. The province’s proposed $14-billion upgrade to transit systems in the coming years will make suburban areas even more appealing. New highway systems are also playing a role, especially in the Sea-to-Sky corridor, where Squamish is reaping the rewards of highway upgrades.
The real-estate boom of the past five years is also pushing condo buyers to give wood another chance. While concrete construction has been popular in Vancouver, particularly in the wake of the province’s leaky-condo crisis, wood-frame condos are riding a wave in Surrey. Savvy investors see them as delivering a better return over the long term than the chic but significantly more expensive concrete units sprouting around SkyTrain stations. These may have attracted a following among enthusiastic, but not necessarily sophisticated, investors who expect the market to keep rising.
The good news is that the boom still appears to have legs. Developers have largely been disciplined in the face of volatile conditions south of the border, and, while financing conditions are tightening for everyone, downward pressure on interest rates means loans are still affordable.
Armed with an eye for value, buyers are likely to be scouting one of the following six neighbourhoods.
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Hastings Street is offering some of the best diamonds in the rough for prospective homebuyers, and no, we’re not talking about the area that has caught developers’ attention around the rising Woodward’s building (set to be completed in 2009).
The area that’s gaining attention – and becoming proportionately less affordable as a result – is the Hastings-Sunrise neighbourhood on either side of Nanaimo. While new projects by Bosa Development Corp. and others renovate the main strip, side streets still offer ample fare for bargain hunters in an area dominated to the west by some of the city’s original strata projects and toward the PNE grounds by older single-family homes.
With comparable West Side homes in Vancouver typically fetching more than twice what properties on the East Side do, the appeal of the area is understandable. The price of a detached home in East Vancouver rose 10 per cent in 2007 compared to 2006, but the average price of $638,900 was still less than half that of a similar West Side property.
“There is still a lot of potential for increased value and probably a little bit more, proportionately, than in some of the other areas of Vancouver,” says Dexter Associates Realty broker Lisa MacIntosh.
The area is about three years behind Commercial Drive in terms of valuations, MacIntosh says. That lag translates into one-bedroom apartments that cost in excess of $300,000 a few blocks west
checking in at somewhere under $250,000 in Hastings-Sunrise. Similarly, a single-family home worth $800,000 and up elsewhere in the city is available here for $600,000. Better yet, the rents are comparable to anywhere else in the city, meaning a prudent investor may actually be able
to wrest a cash flow from a property – a feat virtually unheard of elsewhere in the city.
While the clothing shops and galleries that have sprouted along similar East Side corridors such as Main Street and Commercial Drive haven’t risen in Sunrise yet, a retail renaissance is afoot as the local London Drugs undergoes a redevelopment. The newer condo developments along Hastings are also creating space for smaller retailers to move in, complementing the bakeries and greengrocers that have given the strip a real community appeal.
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Some consider it Surrey without the commute. Out toward Burnaby, adjacent to Centennial Park at the south end of Kingsway, properties are changing hands.
Developers see Southeast Vancouver, with views toward both the Fraser River and the North Shore mountains (depending on your elevation), as fertile ground. The Vancouver-based Holborn Group, which is developing the stylish Ritz-Carlton on West Georgia Street, is pursuing The Hills on the site of the old Eldorado Hotel at the south end of Kingsway. The 22-storey tower will debut this spring with units starting at approximately $239,000. It illustrates the two characteristics of the action taking place in south Vancouver – relatively affordable properties that are making the area a destination for developers and, in turn, homebuyers.
Andrew Peck, owner of Vancouver’s Royal Pacific Realty Group and head of the B.C. Real Estate Association, says the area is an example of the opportunities that remain for savvy buyers. Better yet, it’s far enough from the city core to feel suburban while still being in Vancouver and close to the small-scale street-front shops that contribute to East Van’s appeal.
A darker side lies in the newer forms of urban development that are – depending on your perspective – either ushering in a denser, urban future, or threatening what some local residents claim makes the area liveable.
It’s not just projects such as The Hills that are causing a stir. Underlying developers’ excitement are city plans for a rezoning that will permit the neighbourhood’s densification along the lines of what
happened at Kingsway and Knight Street, where King Edward Village is anchoring renewal in the Kensington-Cedar Cottage neighbourhood.
“Most of what’s going on in Vancouver these days is redevelopment,” says Peter Simpson, CEO of the Greater Vancouver Home Builders’ Association. “Anywhere along a corridor is doing well.” With Kingsway running through it and two rapid-transit stations, this is an area squarely in the path of future development.
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Developers have been bullish on Burnaby and New Westminster, thanks in large part to plentiful rapid-transit connections. But the enthusiasm may be too much of a good thing.
Condo starts in the region have exceeded demand for the past several quarters, according to accounting firm PricewaterhouseCoopers LLP (PWC). Its latest report describes New Westminster as “now a buyer’s market,” with 58 per cent of new inventory unsold. “Can’t say you weren’t warned,” it advises. The grim outlook for developers, some of whom are already discounting units, is good news for patient buyers who watched the boom and are now game to take advantage of deals. With 4,100 starts anticipated in the region over the next 24 months, PWC expects the buyer’s run to last for some time.
Of course, the buyers differ from those who supported New Westminster’s rebirth from a troubled urban core to an urban-development site, a phenomenon Re/Max Advantage broker Becci Dewinetz sees both on the Fraser riverfront and along the rapid-transit lines that wend through the two cities. Today’s newcomers are helping push up prices, which continue to rise after gains of 10 to 14 per cent last year.
While Burnaby and New Westminster are both more affordable than Vancouver, New West still boasts some of the most affordable properties of all, with older single-family homes in need of a little TLC commanding $400,000, and apartment condos available in the $200,000 and $300,000 range.
“Burnaby is still much more affordable when you come from Vancouver,” says Doris Gee of Re/Max Central Realty, who specializes in New Westminster condos. “But then the first-time buyers are kind of chased away if they want two bedrooms, so they come to New West.”
But Gee advises buyers to beware; the leaky-condo crisis left many here reeling and continues to inform the market. Moreover, she advises buyers to read the fine print. A recent listing went on the market at an attractive price, but the developer had taken advantage of a contract clause to lease the elevator back to the strata corporation – a move that boosted the condo fees to nearly $500 a month.
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Sales in Squamish are accounting for a rising share of listings, posting dramatic gains in 2007 that herald what many expect will be a hot market for years to come. Indeed, the Canada Mortgage and Housing Corp. (CMHC) reports that Squamish posted the strongest sales increase anywhere in the Lower Mainland, rising 21 per cent in 2007 over the previous year.
The activity is a harbinger of what demographer David Baxter of the Urban Futures Institute in Vancouver told a CMHC housing conference two years ago would be an up-tick in activity continuing through 2016.
Baxter expects resale activity in Squamish to be up approximately 600 per cent over the next eight years. Driven by young people attracted by the job opportunities of the 2010 Winter Olympics and the attention the region will receive, Squamish will solidify its position as the hub of the Sea-to-Sky corridor.
It’s something Lisa Bjornson, general manager of the Whistler Real Estate Co., is already seeing.
While Whistler’s growth is capped, Squamish’s is just beginning and will underpin the future growth of Whistler. Already, residents of Whistler and Pemberton stream down the Sea-to-Sky each weekend to shop at Wal-Mart, Home Depot and the other retailers that have set up shop in Squamish. The new Quest University Canada is here, as well as a bustling campus of North Vancouver’s Capilano College that specializes in, among other things, tourism programs. Small surprise that Baxter projects the local population to double by 2031.
The linchpin of it all is the Sea-to-Sky Highway upgrade, which will improve access to and from Vancouver and the region.
“We will continue to become more integrated, more connected,” Bjornson says. “That’s going to be the ultimate outcome of this whole thing.”
That makes buying now a wise choice, and while apartment condos may be dominating new product, Bjornson suggests that buyers consider the opportunities of existing single-detached and townhome properties.
“When you compare the older, existing housing inventory to new, there’s a significant variance in the price, and the rents don’t change that much,” she says.
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Anyone who regularly drives out to Mission knows two things that shape demand for homes here. First, relatively few links to Vancouver and the rest of the region have left it off the beaten path. The major cities of the Fraser Valley – Abbotsford and Chilliwack – are effectively closer than Vancouver, though increased service from the West Coast Express commuter train could change that.
Second, the separation contributes to a rustic charm that has made the area a hidden gem largely overlooked by homebuyers but which is slowly being discovered.
The seclusion has also kept prices here among the most affordable in the Lower Mainland. While the price of the average apartment overtook Abbotsford last year, hitting $211,600 (a 12.6-per-cent gain from the previous year), it’s cheaper than similar product in Surrey and most places further west.
The Canada Mortgage and Housing Corp. report that found that the average home in Mission rose 20 per cent in price last year shouldn’t faze potential buyers. Most increases were largely driven by new construction, not the significant number of older homes available. With the corporation reporting sales down by about six per cent last year, opportunities abound for bargain hunters.
“It’s one of the most affordable regions in the valley. We’re reaping the rewards of that,” says David Rishel, owner of Re/Max Little Oak Realty in Mission and Abbotsford and past president of the Fraser Valley Real Estate Board.
But the region’s best-kept secret is getting out. Average resale prices have doubled over the past five years and Rishel expects the completion of the Golden Ears Bridge in 2009 will open the door to an influx of eager buyers. Anticipation of the boom is prompting Genstar Capital LLC to plan a 1,000-home subdivision on the west side of Mission.
“The access will be so much easier for people to get out here,” Rishel says of the bridge’s impact.
“The infrastructure now to get into Vancouver is pretty bad. Once the Golden Ears Bridge gets in, then there’ll at least be some options.”
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Surrey just gets no respect. While real-estate marketers have been trying to brand the notorious Whalley area around the landmark Central City office and shopping complex the new Yaletown, writer Charles Montgomery was blunt in a Canadian Geographic article a couple of years ago in his assessment of how the city lacks a true core: “No centre anywhere,” he grumbled as he recounted a drive across the city.
Sure there are the towers, and the lineups of eager buyers (mostly investors, we suspect) grab headlines, but Surrey’s makeover is still in progress.
That doesn’t discount the fact that a recent Landcor Data study found that six of the region’s 10 hottest residential markets are in Surrey. While buyers north of Highway 10 are seeing rising inventories of new, unsold condos, townhomes south of Highway 10 are in short supply.
PricewaterhouseCoopers LLP reports that with 3,000 new apartment units set to come on stream in North Surrey in the next 24 months, patient buyers may be able to find what they’re looking for within the year.
But it’s not the high-rise concrete condos that stand to yield the most benefits to purchasers, says Mark Belling, a veteran marketer and president of Fifth Avenue Real Estate Marketing Ltd. in Surrey. In 2008 “probably some of the best investor values will be in the wood-frame condos,” he says.
With concrete units selling for $550 a square foot, most long-term investors aren’t going to take chances when wood-frame units are selling at $325 to $350 a square foot.
That said, he expects discounting to transpire as some purchasers of high-rise condos flip units prior to the completion of the projects rising around Central City.
A wealth of single-family options are available in the Cloverdale and South Surrey area, Belling adds. The area appeals to affluent residents attracted by the rural atmosphere. An entry-level home on a small lot runs in the range of $450,000 to $550,000 – not bad compared to the $650,000 average a similar home fetches on the resale market in East Vancouver (and about a third the price of a West Side home).
Watch for the Grandview Heights area of South Surrey to offer plenty of opportunity as it opens up over the coming year too.
