Burrard Place Developer & Reliance Properties President Jon Stovell talks the Future of Vancouver Real Estate

About Jon:

Jon is President of a regional developer (a family-based company) that specializes in heritage revitalization work (such as in Gastown and East Vancouver). Recently, they’ve been doing new commercial and residential high-rise construction. Jon has been involved with the Urban Development Institute for many years and is currently Chair. He’s also been involved with city advisory groups for years, and is quite active in policy and public dialogue on real estate and housing issues.

On how his company got started:

Jon was introduced to the company by the son of the founder—they played in a university rock band together. At the time, he was integrating accounting systems on PCs and helped the founder with this. From there, one thing led to another.

On advice for younger millennials trying to get into the market:

Do whatever you can to get in. Millennials are vocal but mostly within their own bubble. They need to engage politicians and talk to their councillors and government leaders, rather than just within social media. This happens a bit, but it’s too isolated (for instance, Generation Squeeze).

On if he foresaw the explosive growth of Vancouver’s market over the past four years:

Regarding the pace, nobody thought it would be so strong, but they weren’t that surprised everyone wants to come here (due to climate, lifestyle, etc.) Jon’s company has stayed strong in anticipation of this continuing. It helps to look back: Vancouver has always had unaffordable when it comes to real estate (there are articles dating back to the 1920s and 1930s about this). Jon put his first mortgage’s down payment on a credit card in the 1980s!

It’s always been tough—millennials shouldn’t think this was reserved just for them, though it is particularly tough now.

On changes we might see in the short-term:

There is healthy supply coming in but it will take years. It’s possible to see rents and prices ease up in certain areas of the city, but the overall trend will continue to rise.

On areas he’s most excited about:

They are active on the Broadway corridor, and in central Surrey and Vancouver’s east side (Hastings—Sunrise). There is a lot downtown, too. Unlike what we often hear, Jon believes Vancouver’s downtown is not even close to being built out, as about 25-30% of the properties downtown are under 10 stories high. We will see an intensification of land use that we’re not used to. The land underneath the buildings coming down can hold a whole lot more. The West End is full of small walk-ups and some medium-sized towers were built in the 1960s, but this stopped due to a moratorium and development froze. There was some denser development, but the area is quite underutilized.

On where he’d buy as an investment in Vancouver:

The political reality is that planners and politicians are mostly unwilling to increase density on green, leafy streets of any neighbourhood. So, most development will happen on the arterials. Buy anywhere you can, such as Nanaimo, Victoria, Main, Fraser, Broadway, or 4^th Avenue. If you can get a big enough piece of land for development, that’s great. Buy something to run your business and wait to be bought out—you’ll make more money than you did working that whole time.

On the NDP’s budget announcement in February and his predictions for housing policy changes:

The industry is quite engaged and Jon gives a lot of credit to the NDP. They are good listeners and are being quite careful about their plans. We might see an increase in the foreign ownership tax and an extension of that opportunity to other municipalities. There will be increased reporting to government, and maybe the public, about presales. Also, there may be some type of speculation tax (i.e. a higher tax on profits from the sale of real estate you haven’t owned for a certain amount of time, or a surtax/capital tax you get back if you demonstrate you’re filing appropriately).

BC Assessment might open up more tax classifications and take the burden off retail and rental apartments. [The industry] hopes they will not change the residential tenancy act further, as they’ve already taken away fixed-term tenancy. If they make it more difficult to get a reliable income stream from rentals, we will see thousands of units planned for construction go sideways or become condos. Every time they implement tax measures to drive away condo demand, they make it more expensive. This causes locals to rent, which increases rent prices. Government needs to think very carefully about the unintended consequences of their policies.

On policy changes that would help affordability:

Increase supply. It’s astounding how much time we spend arguing about the market share of foreign buyers, but they are not driving most of the market and only account for a small proportion. The real issue is the lack of housing inventory. They say you need six months of unsold listings to represent a balanced market, but in new home pre-sales there are 0 months of unsold inventory. It takes three to seven years to get a permit for a major project in Vancouver. Plus, there is not enough land that’s zoned and ready to go.

Even in the Cambie corridor, every single building is a re-zone (despite the fact they know what the buildings will look like). The process is too long and too risky.

On criticism of the development industry calling for more supply (largely because they have a vested interest):

The industry isn’t knocking on the doors of politicians or paying money to get this. Of course the development industry is interested in influencing who’s in government—the industry is incredibly connected to it. For every building they build, they have to appear before City Council. So, they must educate Council on the business and on the public’s needs. It’s a natural consequence of their business decisions being regulated by government—that won’t change. Funding will be different, but the industry will encourage good people to go into government. It’s ironic that those speaking up the most for supply are developers, but there is a win-win: lower prices, build more volume in a predictable way and make the same or more money, and then people can actually buy.

Construction development is the largest industry in BC right now. However, developers are having issues finding skilled labour—there just isn’t enough available. If the supply, timelines, and pace of projects were more predictable, the trades could plan and respond to demand better.

On what the outlook for 2018 looks like:

It’s a good time to buy. The market is tempering a little in certain asset classes. Towards the end or third quarter will be the softest patch, and then the market will strengthen again. Interest rate increases and uncertainty around provincial government policies and things like NAFTA are making 2018 softer than 2016 and 2017. It will still be tough and people will still need to be creative in putting money together.

Opportunities in the suburbs are still there (such as in New Westminster and Surrey), but this won’t last long. Burnaby’s approach to development is fantastic—they’re transparent with densification and community amenity charges, and they’re bullish with height. However, they didn’t scale up their building permit department at the same rate, which has caused frustration—currently, it can take a year and a half to get a permit.

Five-wire:

1. Favourite neighbourhood: Gastown
2. Favourite bar or restaurant: Chambar
3. Downtown penthouse or west-side mansion: Downtown penthouse
4. First place he’d take someone from out of town: Gastown
5. Political party of choice: Liberal

• Reliance Properties
• @JonStovell