Inventory glut and government intervention slow Vancouver

by Neil Sharma on 21 Nov 2018

Vancouver’s multifamily housing sector is experiencing a glut of inventory, but with low yields and high buy-ins, investors have taken a step back.

A report from Marcus & Millichap showed the average cap rate compressed 40 basis points over the last year to 2-4%, but investors chasing yield turned to Coquitlam and Chilliwack where they enjoyed as much as 5%.

While Vancouver yields could be described as in the doldrums, vacancy rates are persistently low.

“In terms of multifamily income-producing properties, the Vancouver market has been one of the strongest in North America with vacancy rates hovering around, or below, 1%,” said Rene Palsenbarg, Marcus & Millichap’s regional manager and managing broker. “Because of that, the average rent per square foot is pretty significant.”

Multifamily sales have hit a three-year low, but Palsbarg attributes that to an inventory surplus.

“It’s more of a by-product of inventory because there’s a glut of product coming onto the market, so it’s just stabilizing itself,” he said.

But the overall market in Vancouver has born witness to a significant downturn that began around July, which marked an 18-year low in sales. By last month, the year-over-year decline stood at about 35%.

“That equates to a 27% decline on the 10-year average because we had a very robust 2016 and 2017,” said Ron Antalek, a REMAX sales agent. “The current listing count is the highest in four years, with the Real Estate Board of Greater Vancouver has a listing count of 12,984.”

While Guideline B-20 is being blamed for the downturn in some quarters, Antalek instead attributes the provincial NDP government’s bid to create affordable housing with repeated interventions in the housing market as the culprit. He added that it’s going to make things difficult for Vancouver renters.

“To suggest affordable housing is created by dropping the market, I disagree,” he said. “The government should have created incentives to the development community that would create affordable housing and rental units. It could have been done in a better way.

“What’s happening is in our province with the NDP’s policies of an increased foreign buyer tax and an empty housing tax has definitely affected the market, especially Vancouver. It has adversely affected the investor community.”

 



Post a Comment



Most Trending News

Is the Canadian housing market overvalued?
News

Wondering what an overvalued housing market could mean for Canadians and investors? It isn't all doom and gloom, but it's important to understand what can happen.

Read More
Immigration is key to a healthy construction industry
News

For decades, we have counted on trades from other countries to bring their skills and expertise to help build our homes and infrastructure.

Read More
US Land Border reopening presents investment opportunities for returning Canadians
News

The US-Canadian land border is finally set to reopen on Nov 8th, spurring many snowbirds to once again make plans to head south.

Read More