Continuing low interest rates and a healthy stream of newcomers will ensure the good times keep rolling in 2015
BY BARBARA YAFFE, VANCOUVER SUN COLUMNIST JANUARY 26, 2015
Photograph by: ian lindsay , Vancouver Sun
Residential construction, and densification, in the Lower Mainland will keep rolling along in 2015.
VANCOUVER — Continuing low interest rates and a healthy stream of newcomers will ensure the good times keep rolling in 2015 for the Lower Mainland’s property development industry. But it also means pricing will continue to pose a challenge.
Three of B.C.’s biggest developers used adjectives like “great” and “incredibly positive” as they delivered a forecast last week to more than 1,100 industry insiders and politicians attending an Urban Development Institute luncheon.
“Vancouver is going to do well, everyone wants to be here,” declared David Negrin, president of Aquilini Development.
He said a recent crackdown on democracy protesters in Hong Kong is likely to enhance Vancouver’s prospects. “We’re very positive on Vancouver, and it’s going to continue for some time.”
Added Neil Chrystal, CEO of Polygon Homes: “We’re picturesque, have a healthy environment, we’re a clean, safe city offering excellent health care and educational opportunities. We are politically stable and close to Asia.
“I see no sign of the residential market slowing down. ... The market will remain balanced and stable in the year ahead.”
B.C. will experience net immigration in 2015 of some 34,600 immigrants and 2,600 provincial migrants, according to research by Mac Marketing Solutions, a company that plans and markets housing projects.
Mac, with offices in Vancouver and Calgary, forecasts that in subsequent years even larger numbers of both immigrants and Canadians will arrive, noting Alberta’s economic slowdown will make heading further west all the more attractive.
So, while a total of 37,200 newcomers are expected this year, the number should grow to 53,200 by 2018.
Combine that trend with low interest rates and a low vacancy rate in the region, and you have a recipe for continuing strong growth in the property development and real estate sectors. Unfortunately, that does not augur well for affordability.
Between 2006 and 2014, benchmark prices for all types of real estate in Metro Vancouver saw significant price jumps, according to Mac research, with the greatest increase — 46 per cent — recorded in Vancouver’s east side. West Vancouver and Vancouver’s west side both saw increases of 41 per cent.
Referencing the retail sector, Kevin Layden, CEO of Wesbild, said North American stores are downsizing as they move online. But even here, Vancouver is well positioned, never having enthusiastically adopted a big-box retail model.
The city has 13 square feet of retail space per capita, compared to a Canadian per capita rate of 19 square feet and the U.S.’s 30 square feet.
Commenting on Vancouver’s affordability crisis, Negrin cited the high cost of land and remarked: “Everyone is frustrated.” The only way to keep prices down is to increase density, he said.
Yet a Demographia study released last week on housing affordability argues density and urban land containment boost housing prices by restricting development of cheaper perimeter lands.
Chrystal argued development is being constrained by an overly complex and time-consuming municipal approval process. At UBC, he reported, the development approval process takes six months, compared to 12 to 30 months elsewhere in the region.
Added Negrin: “We have to find a way to streamline the process. Anything over one year is too long.”
Chrystal pointed to another challenge for Lower Mainland developers — offshore buyers are starting to purchase land for development that he said could lead to oversupply in certain markets.
They are also posing a challenge in terms of what they are prepared to pay for land acquisitions. “They may be parking money from offshore. We can’t compete on price.”
The developers complained of increasing costs for building materials and a stronger U.S. dollar, forcing higher costs. Prices for drywall, windows and steel were cited.