The week’s top stories focus primarily on the Metro Vancouver housing market, from housing start declines to Vancouverites’ perceptions on the so-called ‘crisis.’ Meanwhile, property tax rates across Canada are – perhaps surprisingly – the lowest in B.C., while industrial supply remains ellusive.
Here is Western Investor’s pick of the top commercial real estate stories published this week.
Nine-in-10 Metro Vancouverites agree region’s housing market is in crisis: poll – Business in Vancouver
There are misconceptions about the causes of the supposed housing crisis, according to Insights West president.
Ninety per cent of residents across Metro Vancouver agree the region is in the midst of a housing crisis, according to the results of an Insights West poll released August 2.
This includes 64% who “strongly agree.” Agreement is consistently high across all groups and demographics but was highest among those earning less than $40,000 a year (98%) and home renters (97%).
Respondents cited foreign homebuyers (84%), population growth across the region (80%), shadow flipping (76%) and money laundering (73%) as the main drivers behind the crisis.
Insights West president Steve Mossop said there are major misconceptions when it comes to naming the “culprits and causes” of the crisis.
“There is no doubt that Metro Vancouver residents believe that we are in a major crisis when it comes to housing, and the issue is dominating public opinion,” Mossop said.
“As the housing situation reaches crisis proportions, there is no shortage of scapegoats to blame, despite studies that show foreign buyers and money laundering are minor factors in the equation.”
B.C. housing starts sank in June as a steep decline in the Vancouver Census Metropolitan Areas (CMA) offset gains elsewhere in the province, Bryan Yu of Central 1 Credit Unions reports.
Total urban-B.C. starts fell to a seasonally adjusted annualized rate (SAAR) of 34,300 units down 15% from the 40,600 unit pace in May and 9.8% below year-ago levels. Provincially, multi-family construction fell 21% from May to 24,600 units while detached starts rose by a modest 4.4% to 9,700 units SAAR.
Starts in the Vancouver CMA fell from a 26,500 pace in May to 17,000 in June to account for most of the decline. While the lowest since January 2017, volatility is the norm and a bounce back in July would not surprise. That said, the trend has eased from a near-record fourth quarter. Capacity factors may be holding back starts given a record high number of units under construction and rising construction times.
Offsetting this drop were steady but elevated starts in Kelowna and a surge in Victoria-area activity. Population and strong employment growth in the latter have contributed to increased construction in recent years.
Year-to-date growth narrowed to 2.8% from 6.2% in May. Combined apartment and townhome units were still 6% higher than 2017’s first half, reflecting a shift toward affordable condominium and townhome product as well as a rise in rental construction. Kelowna CMA starts fell 30% through the first half, with Abbotsford-Mission down more than 60% due to fewer multi-family starts.
Inclusive of rural B.C., housing starts are forecast to ease 3.5% to 42,000 units this year.
Recent Labour Force Survey estimates have pointed to a slide in the number of people working in B.C. While natural to attribute this erosion to a weaker demand environment, job-vacancy data suggest intensifying labour shortages, which could be constraining hiring.
First-quarter job vacancies in B.C. ballooned 35.7% from same-quarter 2017 to reach 92,680 positions. This was the second-largest increase among provinces, behind only Quebec. The Lower Mainland-Southwest saw the addition of 16,710 vacant positions (up 34%) from the previous years.
B.C.’s job-vacancy rate rose one percentage point from a year ago to 4.2% and compared with a national job-vacancy rate of 2.9%. The gap suggests significant labour shortages and skills mismatch in B.C., in part reflecting a period of strong growth and hiring in recent years.
Despite sky-high home prices, residents of most B.C. cities can breathe a moderate sigh of relief at tax rates.
In a province that is home to some of the country's most expensive real estate markets, British Columbians need to take wins where they can find them.
Good news comes in the form of a new study by real estate website Zoocasa, which surveyed 25 major Canadian cities and found that residents of major B.C. cities pay the lowest property tax rates in the country.
Vancouver property taxes were found to be the lowest in the country, at 0.24683 per cent of assessed value. This is less than half that of the second-lowest city, Abbotsford, which has a rate of 0.51300 per cent.
Zoocasa found the four cities with the lowest property tax rates were all in B.C., with Victoria at 0.52035 per cent and Kelowna at 0.52605 per cent. No other B.C. municipalities were included in the study.
However, as Zoocasa pointed out, “Living in a region with a low tax rate doesn’t necessarily translate to less tax paid, if average home prices are higher.”
Solutions to the industrial land shortage continues to be an upward battle, Peter Mitham reports.
Abbotsford failed to win exclusion of 497 acres from the Agricultural Land Reserve (ALR) at the end of April, including 331 acres along its border with Langley. The decision is now a landmark across the region for the challenges facing anyone trying to alleviate Metro Vancouver’s industrial land shortage.
“Everything we’ve seen from the [Agricultural Land Commission (ALC)], including the recent Abbotsford decision, just shows that they’re really not open to anything,” remarked Maple Ridge Coun. Tyler Shymkiw at the end of June when Kevin Davison sought – and was refused – the city’s blessing for a proposed exclusion of his dairy farm for industrial development.
The bitter irony for Abbotsford is that it followed guidance ALC staff gave to parties seeking to exclude properties for non-farm use. The failure of its bid has prompted Abbotsford mayor Henry Braun to seek fresh guidance on what municipalities are supposed to do.
Meanwhile, the industrial land shortage increases, pushing up the cost of space and raw land.
Michael Farrell, a principal in the Vancouver office of brokerage Avison Young, said demand for space and land is as strong as it’s ever been and Metro Vancouver’s ongoing economic growth will support activity for the foreseeable future.
Buyers are paying $300 a square foot in Metro Vancouver, and even prices in Chilliwack are $200 a square foot. Meanwhile, Surrey land prices are maxing out at $3 million an acre and the upward pressure is spilling over into Langley, where deals are in the works for $2 million an acre. Chilliwack comes in cheapest at $1.5 million an acre, but land anywhere is tough to find.
Avison Young reports that Fraser Valley industrial deals are “constrained only by an ongoing lack of new supply.” It doesn’t yet have data for the second quarter, but the trend is clear. The 47 industrial deals done in the first quarter represent significantly less than a quarter of those done in 2017. The value of $131 million, meanwhile, is nearly a third of 2017’s tally of $465 million.
“The delivery of significant amounts of new industrial space in the Fraser Valley since 2015 has yet to provide any relief in the tight vacancies still being recorded in the valley’s industrial markets,” reports Avison Young regarding Fraser Valley industrial markets.
Doing so is going to require a regional solution, if recent comments by Braun are any indication. Similar to housing demand, which has tarred the region with a reputation for high prices even though pockets of affordability exist (increasingly within the Fraser Valley), the region as a whole is suffering from Metro Vancouver’s industrial land shortage.