September 4, 2015

The Low-rise apartment housing stock: Some not-good news

Just out from Business in Vancouver:

BIV

Sales of mostly older apartment buildings dominated high-value commercial real estate sales during the first half of 2015, accounting for nearly 30% of the total dollar volume across British Columbia. … according to the B.C. Real Estate Investment Review from Avison Young’s Vancouver office. …

The report implies that private investors, who make up more than 90% of all transactions, are simply parking cash in residential rentals.

“The acquisition of multi-family assets is now more about wealth preservation as opposed to earning a return or even acquiring a property with an eye to redevelopment,” Avison Young states.

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I tell some of the backstory about this era of apartment construction here:  Density in a City of Neighbourhoods (4a).  Michael Kluckner provides even more detail: Kluckner – On the evolution of the Vancouver apartment building.

As mentioned in an earlier post, councils across the political spectrum have endeavoured to save this housing stock, believing that its age and lack of amenities would keep it priced for lower-middle-income renters, even when located in outstanding locations.  And by and large it has.

Others, notably the Goodmans, who specialize in the sale of this housing stock, have argued that it needs to be replaced, and the city has the change to lever significant increases in housing stock out of the process (replacing a 23-unit building with an 80-unit highrise, for instance).  But the realtors are not politicians, and they underestimate the blowback that would occur with a wholesale rezoning or even modest redevelopment.

But as the underlying value of the housing stock increases, someone is going to endeavour to realize it.  “Wealth preservation” is fine as far as it goes – but eventually it goes to “wealth maximization.”  And City Hall needs to have a strategy before the demolitions and rent increases do.

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Comments

  1. I’m surprised anyone is even arguing the point that replacing one of these with a high rise makes things more affordable. Nothing in those highrises offers as low a monthly rent. There are also needs to be a mechanism to stop the usual suspects from kicking out all the tenants, renovating the heck out of the suites then marketing them as luxury rentals.

    1. Don’t forget every new tower comes with levels upon levels of underground parking mandated by the City of Vancouver adding huge development costs. Greenest City……BS

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