New Westminster's New Chapter

British Columbia's first capital is fast-evolving as a capital choice for real estate investors. While recent decades saw it become the grungy grandparent of Vancouver, the past two years have seen a steady turnaround as redevelopment activities have picked up steam.

Condo towers are springing up around the local SkyTrain stations (Metro Vancouver's elevated rapid transit option), and the Royal Columbian Hospital and other critical public institutions are getting makeovers.

Moreover, housing here is cheap - often $200 a square foot less than comparable units in Vancouver. That translates to a benchmark price for a condo of $298,300, more than $100,000 less than in Vancouver.

Cheaper prices, combined with the redevelopment opportunities, have kept new construction in line with demand. Most observers estimate there to be just enough units to see New Westminster through to the end of the year.

Then, resale product will be key. Condos enjoy strong demand because of the transit connections, and Elton Ash, regional executive vice-president, Re/MAX of Western Canada (1998) Inc. doesn't see that trend changing.

"That area will always remain the strong, viable investment alternative for people to look at," Ash says of the condos springing up in the city's downtown core and along the transit corridors serving it. "Location is always key."

By the same token, investors stand to benefit from some of the same pressures that buoy the downtown Vancouver market. Development in the region's oldest urban centre faces the limits of existing land uses and the Fraser River, limiting new construction to redevelopment plays.

This is evident in the planned transformation of the former Labatt brewery site in the Sapperton neighbourhood into the Brewery District.

The mixed-use neighbourhood will feature eight towers accommodating upwards of 1,250 residents and 175 businesses.

Opportunities also exist for smaller investors, however, with a significant 10.4 per cent of existing homes being in need of major repairs, according to the 2006 census. This sort of stat highlights the need for new investment, which has already started to take place - unlike in neighbouring parts of

Surrey across the Fraser River where large greenfield sites are still available.

"That's why inventory rates are lower there than across the river in Surrey," says Ash, noting the relatively unfettered market in the neighbouring municipality that keeps prices low, with less chance of appreciation than in the constrained neighbourhoods of New Westminster.

Still, investment is happening. This is seen in housing starts, which were up tenfold in New Westminster in the first five months of 2010 versus the same period in 2009. Multifamily construction was the largest contributor to the 159 recorded starts.

On the rental side, finished product is leasing at attractive rates but not far off the regional average of $978 a unit in a region where vacancies are 2.2 per cent. Given the cheaper cost of housing in New Westminster, a wise investor is able to provide a condo to the market at more attractive margins.

Small surprise, then, that census figures tag renters as comprising nearly half of the municipality.

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