Affordability and new mortgage rules may not only result in a pronounced exodus from Vancouver into its surrounding municipalities this year, they could drive people into smaller abodes, too.
Alture Properties CEO Peter Cheung has noticed Vancouverites bolting for the suburbs out of necessity rather than choice, and the metropolis’s outskirts, like Langley and Abbotsford, are seeing a surge in preconstruction condo activity.
That’s where Cheung says micro-suites—which are currently prohibited in Vancouver, but not in Burnaby or Victoria—could prove to be sound investments.
“Micro-suites are all based on affordability—that’s the attraction—and the trend has been going smaller and smaller in terms of size, so those products are economically attractive,” said Cheung. “If it’s well-designed, it could be a good investment.”
Stringent mortgage stress testing has also come into effect this year, and it could further exacerbate migration to the suburbs.
“The people who need the most help in terms of mortgage, they’ll be hit the hardest,” said Jason Turcotte, Vice President of Development at Cressey Development Group. “The people stretching to get into the bottom end of the marketplace will be pushed out. They may need to look at a suburb or two out of Vancouver, and it will further complicate the demand for sub-markets.
“The demand is still there, but it’s just going to get moved around.”
Vancouver’s condo market is expected to remain robust through 2018. That’s good news for renters because the city’s vacancy rate is under 1% and condos are helping keep inventory afloat, albeit just barely.
“We’re already seeing strong activity in the first week in terms of acquisition of condos,” said Cheung. “I think there’s going to be continuous demand with condos over single-family detached, similarly carrying from the last two quarters of 2017, when the single-family sector softened and multi-family condos have been quite in demand.”
Two events to watch this year are the municipal election and the new provincial NDP government’s housing strategy, but Cheung thinks the market will remain stable.
“Nothing has dramatically changed to shift the landscape of construction or building,” he said. “Cost is going up, and because of that you’ll see the impact of prices going up potentially.”
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