2021 Top Real Estate Questions Answered!

How is the Vancouver real estate market?

Summer 2021 had the lowest inventory in Vancouver in 30 years. We were advising buyers to hold off until the fall. But come fall, those listings didn’t materialize. We were almost 36% down on inventory in October 2021 compared to October 2020. So inventory is a big problem in the Vancouver real estate market.

People want to get into the market but there’s just nothing to buy. But it’s a self-fulfilling prophecy: buyers who are wanting to move are waiting to sell their place until they see something they can buy. So it’s a long chain of supply constraints.

BCREA (British Columbia Real Estate Association) says we are 50% below what a healthy market would be. If you want to purchase an investment property right now, it’s very difficult to buy.

While we have no inventory, the market is very uneven. There’s been very high price appreciation, especially in the suburbs. Downtown Vancouver is basically flat while the suburbs are on fire.

The City of Vancouver is undervalued compared to other places in the Lower Mainland. There are clear gaps in the market. We are tending to a more vibrant core post-covid, and the rental rates are showing that. We seem to be returning to normal, instead of the “new normal.”

What are the buying trends in Vancouver real estate? 

Buying trends have changed a lot in the last 18 months; there are different people in the market now. We’re seeing an almost entirely local market, people moving through the market, people moving away from density, and people prioritizing more space and green space. We are missing people who made the downtown core thrive: immigrants, international students, students, inter-provincial migrants and investors.

How do downtown Vancouver real estate prices compare to the Vancouver suburbs? 

Residential composites show:

• Abbotsford up 32.1%
• Mission up 36.5%
• Maple Ridge up 29.3%
• Vancouver West up 7.1%
• Vancouver East up 11%

The numbers out of Vancouver aren’t bad; 7.1% in any given year is a strong number. But when you contrast these Vancouver numbers with the runs in the Valley and the suburban market, there’s no comparison. It seems the closer you get to the downtown core, the flatter the increase.

We are seeing a narrowing of the gap between the suburban markets and the downtown core. Even though Vancouver had a strong year, we’re talking about triple the price appreciation in the suburban markets.

Let’s look at Yaletown Park, which is a great building in downtown Vancouver, built in 2007. One of the last sales at Yaletown Park was in October 2021. It was a one-bedroom that sold for $658,800. The same unit was sold in July 2017 for $652,000. So in four years, the appreciation was only $6000. That means whoever bought and sold that unit actually lost money. This highlights how flat the downtown market is. We’re seeing this across the board in the downtown core.

What should I buy in the Vancouver real estate market at the entry level? Where should I buy in Vancouver for under $1 million?

We’re always looking for gaps in the market. We’re looking for when values start to defy logic – like when a townhome costs as much as a single family home.

As an entry level investor in Vancouver, I would buy in the downtown core and the surrounding area. I would buy “cheap and cheerful” so a studio, junior one bedroom or a one bedroom. Rental demand in the core is outpacing buyer demand, so this would be a great investment.

What is the rental market like in Vancouver?

Vacancy has hit its lowest level in two years in the Vancouver rental market. In Q3, rental rates have increased dramatically. So we’re seeing very low inventory and high rental rates. Junior one bedrooms are up 22.7% in terms of the rents they’re getting, at basically $5/square foot. Rentals.ca reports Vancouver is up 3% month over month and almost 17% year over year.

There is basically no rental inventory for one bedrooms in Vancouver. We just closed on a junior one bedroom in East Vancouver near the core. We got the keys on November 11th and it was rented by November 12th. It rented for $200 more than the appraised rental value and it’s cash flowing. With flat prices and increasing rent, we’re seeing an increase in the ability to cash flow in Vancouver.

What should I buy in Vancouver for over $1 million? Where should I buy in Vancouver?

There’s a case for detached houses in Vancouver on both the east and the west side. Have detached house prices spiked? Yes. But if you look at the covid effect on the suburban market, where prices have spiked 27-40%, it is giant compared to the Vancouver detached market, which spiked 13%.

We have a narrowing gap that we want to highlight. The suburban markets have gone crazy; people have left Vancouver for more affordable markets and more space. Vancouver has done okay, but hasn’t seen anywhere close to the same price appreciation.

What is happening to single family houses in Vancouver?

Vancouver is going through our own version of the Manhattanization process. It is the death of the detached house in the city. Affordability is a huge issue in Vancouver and the mayoral candidates are all running on platforms of density. The remaining singles family homes will be replaced with townhomes, multi-family buildings, etc. So if you own a single-family detached home in Vancouver, you’ll have the potential to redevelop or sell to a developer, or you’ll be left with an increasingly rare commodity.

You want to own a single family detached house in the City of Vancouver because every year there will be fewer houses (as of 2017 there were 47,000 detached houses). There’s a push for “best use” which allows duplexes to be built on single family home lots. It’s a continued push for density and the best use of land. When that happens, the price of those single family lots goes up. So if you’re able to buy one now, it’s a great investment.

Should I buy a presale in Vancouver right now?

I never want to say never, because there are always great presale opportunities. But there seem to be greater opportunities to make more money in the resale market in Vancouver right now.

Why should someone buy a presale?

There are reasons to buy presale and it’s a very busy market right now. A lot of people feel like they have a lot of cash right now and they’re looking for places to invest. Maybe they want a hard asset to combat inflation or they already have a healthy stock portfolio and want to diversify. They want an easy way to invest, which is what a presale can give you.

Buying a presale can be an easy purchase – you can buy online in a couple of clicks and don’t have to deal with a busy resale market. There’s a long time horizon, which investors like. And for investors who are new to real estate, the presale market may feel simpler.

There’s also the option to reassign and make a profit before the project completes. With presales, you likely won’t have to worry about any levies, at least within the first decade, as it’s a new building.

But the reality is that with the lack of labour, the added expenses of construction, the cost of land, and the extended timelines, presales might not be for you.

Why should someone buy a resale property instead of a presale property?

There are six main reasons to purchase a resale property instead of a presale property in Vancouver today.

1. Today’s interest rate is the deal. We have record low interest rates; this may be the most competitive rate you could have in your life. If you’re looking at a building that completes in 2025, we don’t know what interest rates will be then. So you’re betting on price appreciation. But if you lock into today’s low interest rates with a resale, you can start building equity and cash flow right away, and it doesn’t matter if prices appreciate or not in the next few years.
2. We have predictable and strong rents right now. People are coming back downtown and there’s low vacancy rates. With a resale, you can get it tenanted quickly and start collecting rent immediately.
3. When buying a resale property, you can see what you’re buying. You can walk around the property and there are no surprises.
4. There’s the ability to negotiate in the resale market. There are lots of factors that motivate sellers, like death, divorce or relocation. Negotiation is a lot harder to do at a busy presale sales center. There’s not a developer in the world who won’t fight for the highest price possible.
5. When looking at resales, you can buy in an established building with an established culture.
6. There are huge savings and no GST with resales! If you’re looking at a good presale building downtown, you’ll pay $1600/square foot plus GST. In the resale market in the same area, you could find great product built within the last 10 years, for $1100-1200/square foot. Plus, there’s no GST to be paid! It’s a savings of approximately 40%.

We’re not saying presale is a bad investment; it suggests how much people believe in the market. But for our money, we’d look for a newer resale downtown to get that 40% discount and to start building equity immediately, rather than purchase a presale.