Named the number-one city for real estate investment in the annual ranking published recently by the Real Estate Investment Network (REIN), Surrey is B.C.’s fastest-growing city and its star is rising.
Within the next decade Surrey is projected to overtake Vancouver as B.C.’s largest city. Around 10,000 residents move to Surrey each year, and the entire South Fraser region – which includes Langley and Abbotsford – is projected to absorb 70% of the entire region’s population growth over the next 25 years. REIN said in its report that the young population, and the projected population growth, were key reasons for its top spot, and that Surrey is just at the beginning of a real estate boom.
Surrey also recently came in at number two on Western Investor’s top five list of Western Canadian investment destinations. Our list highlighted the city’s sizable adolescent and millennial population – one in four Metro Vancouverites under the age of 19 live in Surrey. Editor Frank O’Brien suggests that investing in multi-family rental apartments, due to their relatively cheap per-suite value, can be extremely profitable as rental demand in the city increases along with population growth.
Development and economy
The city has enjoyed a huge injection of infrastructure and public amenity investment over the past five or 10 years. The new City Hall and Library along with the new SFU campus have created a worthy public plaza and central district, complete with handy SkyTrain station. Around that area, a one-square-mile healthcare/technology/business hub dubbed “Innovation Boulevard” has brought tech and healthcare business to the city, many of them linked to busy Surrey Memorial Hospital. Cheaper commercial costs, lower land prices and reduced red tape compared with Vancouver all help lure businesses to the city. Companies that have recently opened offices or headquarters in the city include financial software firm Finad, Switzerland’s Temenos, Ireland’s Medtronic, California’s Skydance Media, Japanese electronic music manufacturer Roland, PwC, Coast Capital Savings, Westminster Savings and Vancity.
The economic outlook is promising. Western Investor’s sister publication Business in Vancouver reported in July: “The City of Surrey’s economic strategy for 2017-27, titled Building the Next Metropolitan Centre, lays out ambitious goals. The city hopes to create 36,200 new jobs by 2025, at an annual growth rate of 8%, through… sectors like manufacturing, clean technology, health technology, agri-innovation and the creative arts.”
Still not fully come to fruition, with a lot of development under way and some areas still to be gentrified, North and Central Surrey combine great potential with fantastic transit links – and more of the latter on the way, with the planned Surrey LRT. Add to that relatively affordable home prices, and the huge numbers of residents – including employees of all those companies – projected to arrive, and you’ve got a great bet for residential real estate investment. (South Surrey and White Rock are excluded from this article, as they represent a very different market.)
Prices rising
North and Central Surrey’s potential has certainly started to be recognized, especially in the presale condo market, where investors have snapped up units as fast as they can, sometimes resulting in a sales-centre frenzy. But the resale market has seen rising attached-home prices too, as the graph below reveals.
Although prices for condos and other attached homes are notably higher this year compared with 2016 or 2015, they are still relatively low. The median price of a condo or other attached home across Greater Vancouver in Oct 2017 was $628K – far above the $377K seen in North and Central Surrey.
And that price includes townhomes, row homes and duplexes. Looking at condos only, the North/Central Surrey median sale price in October this year was $330,000, versus a median of $598K across Greater Vancouver.
Cash-flow considerations
But does the rental math stack up for Surrey?
Let’s suppose your budget for an investment condo is the median price of $330K, and you pay asking price for a two-bedroom unit like this one currently listed for $329,900 in Whalley. This top-floor unit is in a smart 2009 building, a quick walk to Gateway SkyTrain station and one stop to Surrey Central and SFU. A unit like this could rent out for around $1,700 a month, if this Craigslist rental advertisement for a two-bedroom unit in the same building is anything to go by.
You’d only need a 30% down payment (although more may be required for a rental unit) of $100K to give you a mortgage of $230K and monthly payments of $1,088 (assuming 3%, 25 years). With $260 a month in strata fees, your monthly outgoings would be around $1,450, after property taxes. That makes this unit comfortably cash-flow positive with $1,700 in rent, and even more so with a higher down payment.
So the city is a great bet for a buy-and-hold investor, with rental rates likely to soar over the next five years, and vacancies to tighten. But REIN reckons the even-smarter move, for those who are looking for high returns, is the fix-and-flip approach, as its investment modelling suggests prices are going to rocket in the short term.
Whichever approach you’re comfortable with, Surrey is an outstanding investment option.
