Office space is the one real-estate category where an oversupply is forecast in the city, to be accompanied by potential downward pressure on pricing.
That assessment comes courtesy of a voluminous annual report, titled Emerging Real Estate Trends 2015, issued jointly by the Urban Land Institute and PricewaterhouseCoopers.
It describes Vancouver’s market as one of the country’s “best bets” in 2015, fourth strongest in the country in terms of investment, development and housing.
Vancouver trails Calgary and Edmonton, boosted by Alberta’s resource industry, and Toronto, where a still-strong condo market is being bolstered by people flocking to live downtown, in more compact spaces.
The report’s bullishness on Vancouver is tied to a recent Conference Board of Canada prediction that, during the next three years, the West Coast city will lead all other major urban centres in economic growth — with a 3.2-per-cent annual increase in output.
The report also cites the role being played by Greater Vancouver’s relatively new tech industry.
And, of course, Vancouver is “a hedge city.”
It “lacks the cachet of Paris or Milan,” opines the report. “But it does offer ... a place for the world’s super-rich to park sizable funds in local real estate as a hedge against risk.
“Returns aren’t the point; safety of capital is, and a $5-million condo is more insurance policy than investment.”
The report also notes that foreign buyers, mainly from Hong Kong and China, account for the purchase of about 40 per cent of the luxury homes and are “one of the key reasons Vancouver real estate prices continue to rise.”
With the economy on a roll and so many foreign buyers, the city has issued a record number of building permits in 2014.
The report identifies a concern about a possible office-space glut resulting from several new office towers being completed. “Some foresee AAA space leasing at B rates.”
No such discount rates are anticipated in the residential sector. The report features a chart showing Vancouverites in 2015 will spend more than 50 per cent of household income on shelter — significantly more than in other cities, even Toronto where just more than 30 per cent will go to housing next year.
Overall in Canada, the property market is expected to be steady, with urbanization being the “new normal. People are flooding into city cores to live close to both work and the lifestyle they crave.”
Retailers and companies are following them with some builders incorporating stores and offices into their centrally located residential housing developments.
Western Canada’s real-estate market will continue to be the most robust, with the region acting as “the country’s economic engine.”
In a separate analysis on Wednesday that focused exclusively on the Vancouver market, Urban Analytics Managing principal Mike Ferreira told a downtown luncheon audience of realtors and developers that not since 2014 have sales for multi-family housing been so strong.
The real estate strategist said investors comprise a significant portion of condo buyers in Vancouver and Burnaby, but purchasing also has been strong among first-time buyers “with help from mom and dad, and low interest rates” and mature buyers, downsizing from single-family homes.
Ferreira told his audience the Chinese are a strong component of the market “and I suspect we will see more impact from that buyer group as we go along, especially with (the political instability) we are seeing in Hong Kong.”