Sales slowing for Metro Vancouver rental apartment buildings

Sales slowing for Metro Vancouver rental apartment buildings

In 2018, 155 apartment buildings sold in the Lower Mainland. As of the end of April, only 31 have sold this year.

Vancouver lags behind targets for mid-level affordable rentals | Vancouver Sun2:28
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Metro Vancouver’s rental apartment building sales market is slowing down.

“There’s no question about it,” said David Goodman, principal with Goodman Commercial, which specializes in rental apartment sales and publishes the Goodman Report.

In 2018, there were 155 apartment buildings sold in the Lower Mainland, according to Goodman’s review of all sales. In the year before that, 150 buildings sold.

This year had seen 31 sales by the end of April, he said. “I suspect this year we may be hard pressed to get to 80 or 90 buildings sold,” he told Postmedia recently.

Goodman attributed the decline in sales to a retreat from the market by developers, especially ones focused on buying up buildings and land in Metrotown and Vancouver’s West End.

Pricing has come off anywhere from seven to 20 per cent in land and in apartment buildings, Goodman said. “I think it’s made for a healthier market.”

In more recent weeks, the price declines have started to generate some activity from potential buyers who may have stayed on the sidelines in the superheated market over the last three years.

“(They’re) recognizing that we’re back to maybe 2016 (pricing) … and they’re looking at buildings, whereas six months ago, they weren’t looking.”

A new price reality has set in and sellers must realize that if they want to sell they’re going to have to come off the record-high asking prices, he said. “There have been some buildings on the market for four, five, six months where the ownership is not willing to recognize the realities of the market, so these buildings will simply not sell.”

Asking prices getting slashed

Goodman recently announced a price reduction on one of his listings at 3070 Kingsway in Vancouver. The site has already been rezoned to permit for a new six-storey, 42-unit rental building. The asking price was recently reduced to $5.7 million, a drop of $688,000.

Various government interventions and new taxes in the market have played more of a role in slow down than the arrival of new purpose-built rental in the market, Goodman said.

There are now 5,595 rental units (across 51 buildings) under construction in the region, according to numbers provided by Goodman. Some of those buildings could arrive as soon as this year, but many will take another two years to complete. Another 4,548 units (63 buildings) have been approved by various municipalities in the region, and Goodman estimated about 80 per cent of those units will get built.

Overall, those additions won’t have much of an impact on the sales market, he said.

“When you consider the massive immigration growth, the low unemployment here in Vancouver, the condo prices which are prohibitive for many… rentals of course are a very viable option. The numbers make no dent whatsoever on demand or supply,” he said.

Rental situation softening, too

As for the rental situation, Goodman said feedback from about six landlords in the market show that there is also a slowdown happening there, too.

“Instead of having eight or nine people come to look at the suite, there will be two or three,” he said.

The ability to boost rent massively on tenant turnovers is also over, he said.

“If a tenant has been with you for 10 years, and they’re finally out and the suite turns over, they would bump it up sometimes 30 per cent,” he said. “It’s a little tougher to do that right now.”

evan@evanduggan.com

twitter.com/EvanBDuggan

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