Bold & thoughtful real estate predictions? Today’s episode is full of ’em! Cameron McNeill (Executive Director) and Ryan Lalonde (President) of MLA Canada join Matt & Adam (Brothers) to talk about the state of Vancouver’s real estate & pre-construction market on the cusp of the Spring. What will happen to Vancouver real estate prices when the borders reopen? Will our market see double-digit growth in the next 1-3 years? And which markets in the Lower Mainland will outperform? These questions and more, powered by MLA Vision and Intelligence. If you are considering buying or selling in 2021, listen to this episode first.
Vancouver Real Estate News, Market Updates, Insider Tips, Stats, & Analysis
Tell us about yourselves.
Cameron: I was first on your show about a year ago and here we are a year later, still not in-studio together. I’m looking forward to recording with you in-studio one day! For almost 30 years I’ve been helping developers envision great real estate projects. About 10 years ago I met Ryan. So we’ve been doing this a long time. I’m very passionate about urban real estate, having grown up in Vancouver. We pride ourselves on making the consumer experience second to none. I love this city and have immersed myself in the real estate world.
Ryan: Five years ago Cameron and I brought together two organizations. Like Cameron, I’ve been selling real estate for about 20 years. We want to add value at every part of the development life cycle. We’re joined by two other partners and that allows us to take on some new ventures. The purpose of the organization is creating and innovating incredible real estate experiences, both in the boardroom with development partners and the customers we engage.
We haven’t talked a lot about the presale market on the show lately. Can you tell us how things are going?
Ryan: You have to reflect back a little bit. About two and a half years ago, it was clear things were changing. All through 2019, we saw buyer confidence fall and the number of transactions, project launches and price points dropped. Those that did launch were smaller and didn’t have the density. But today the market is much more robust. Feb 2021 stats for the Lower Mainland are 42% higher than the 10 year average, and the Fraser Valley is on fire too.
Cameron: Smith & Farrow has been an exciting development project for us with our partner, Boffo. We’re in a strong presale market now. We did have a slump in 2018/2019 and the development community put their projects on hold. And today, we’re seeing those projects come back. We have demand that is exceeding supply, which is creating lots of upward pressure on value and pricing. Smith & Farrow is right on a skytrain, has amazing views and is 45 storeys tall. It sold a huge number of homes in a very short time, and continues to sell very well. That’s all an indication of the health of the greater market and what an awesome project Smith & Farrow is.
We had a virtual realtor event for the Smith & Farrow project where 500 people spent over an hour with us, learning more about the project.
On density and government intervention:
Ryan: Density is so limited in some of the best parts of the Lower Mainland, so there’s a fixed number of homes. There’s not enough to go around and it’s hard. It’s heartbreaking to know people are missing out.
Cameron: I get annoyed when the government tries to muddle in the real estate market. It creates violent swings in the pendulum. These swings make it difficult for both the development community and the consumers to operate. We would like a market that sees slow and steady growth, and where consumers have choice. We haven’t seen an environment like that in over a decade. These violent swings create a lot of uncertainty. The irony is the government is trying to do it under the guise of affordability but it actually creates less affordability and less supply.
Ryan: We need appropriate development timelines. It’s been very challenging. We want to bring more doors to the marketplace. From July 2020-July 2022, I believe we will witness one of the most aggressive run-ups of price per square foot in the Lower Mainland. We have incredible buyer demand supported by record low mortgage rates. We are going to see massive upward pressure. And that doesn’t even touch on increased immigration. So as Cameron said, we’d prefer to see a consistent stable market.
Should we rely on the government to solve the affordability question? What is the way forward to get more supply in the market?
Cameron: Covid has interrupted immigration but the government has increased immigration quotas going forward. New immigrants will choose to live in the energy centres of our country, like Vancouver, Toronto and Montreal. There will be 1.3 million new Canadians in the next three years. But it takes six years to deliver a high-rise. Our region is going to have an incredible wave of new immigrants. The government has a real challenge and the more they monkey around, the worse it gets. The best thing they can do is get out of the way.
Building affordable housing for those who need it is important, and is a real challenge. But Vancouver does it better than most cities in North America. We have walkable neighbourhoods and we don’t just sprawl along highways. The government has to get out of the way and let market forces work. It will still be a struggle to satiate the demand for housing. Vancouver is changing. For anyone who is nostalgic about the Vancouver of 10 years ago, you haven’t seen anything yet. This region is going to dramatically change.
Ryan: The struggle is at the intersection of what Vancouver used to be and what it has to be going forward. We have to identify a vision, track our metrics, and improve on them. From our perspective, we need to find a way to hold those in power accountable for real outcomes when we fall short. We have to look after people from all walks of life – families at all income levels. But it shouldn’t take 2.5 years to get through a rezoning application.
Do you have a price per square foot that you’re expecting over the next year or two?
Ryan: It’s complicated because we’re in a very unique environment right now. When we were at record low transaction rates in 2019 and parts of 2020, we knew the need for housing was still there. The pause that we saw was fueling our rocket and we knew ignition was coming. In the later part of 2020, that rocket has taken off. We’re seeing 10-17% more affordability compared to 2016-2017, due to low interest rates. It’s hard to imagine that we won’t be pushing those same ceilings from 2016/2017.
And then you think about immigration, natural growth and the supply of money. It’s hard to think that we won’t surpass those ceilings.
Cameron: The reason why real estate is so valuable here is that people are prepared to make sacrifices to live in Vancouver. Our homes are not defined by four walls – it’s our communities. Your private space might be a lot smaller but the public space is amongst the best in the world. The living experience in Vancouver is second to none.
People used to aspire to live close to their childhood homes. And then people would move to new communities for the amenities, but still within a short drive of their childhood home. Today, we’re seeing people ready to go up to an hour’s drive of their childhood home. So someone who grew up in Kits is prepared to live in Squamish or Abbotsford to get the space they want. But for those who don’t have a strong tie to the city, they may make the leap and go further to Kelowna or Victoria. But most want to stay in the region.
What areas are you most excited about?
Cameron: I’m excited about the whole Lower Mainland! The Fraser Valley is booming and the housing stock created east of the river is going to be tremendous. It’s a rapidly changing area.
Squamish is an area I think will continue to boom. It’s an incredible lifestyle within a reasonable drive of the city. I really like some of the niche markets like downtown Vancouver. It’s the highest end market but has some upside over the next 6-18 months. Downtown Vancouver will always be a special place.
It’s shocking how downtown prices are stable and only just starting to pick up. It seems like there is a huge upswing potential there.
Cameron: Rents are roughly 20-25% higher downtown compared to other markets where the values are the same. So there’s a lot of upside potential.
Ryan: Because of covid, we have seen one of the most dramatic shifts in lifestyle. Today it is swinging way farther east than ever before but it will swing back. Tourism, hospitality and retail will all return to Vancouver. 2020 and 2021 will be a push towards space, but it comes at a cost. You have to leave some amenities behind. That’s why downtown Vancouver feels like it’s on sale right now.
West Vancouver was hit hard by the changes in 2019/2020 and now it’s one of the strongest single family markets. In the next six months, I think you’ll see a return. We’re already seeing multiple offers on well-priced one and two bed homes.
What are the biggest risks to the Vancouver real estate market?
Ryan: How far will the pendulum come back? What happens during the “return to the office” if there is one? The expectation is over the next 12 months we’ll see how dramatic that adjustment is. We’ll have the benefit of seeing how vaccines make a difference in other global cities who are vaccinating faster than we are.
Will managers want staff back in the office and will staff want to return? That may affect the price point of real estate.
What is your take on working from home? Will technological trends remain?
Cameron: We’re a technology driven organization and have been since pre-covid. But there’s a lot of speculation in this question. Covid has accelerated trends that were already afoot. We won’t completely go back to the way things were. Because our region is so unaffordable, perhaps an employer can have the strategic advantage of offering remote work. I don’t know to what extent it will be embraced but trends have been accelerated.
Ryan: Some businesses will be able to weather this change better than others. If you can find a way to improve your talent pool and productivity, that will be a huge competitive edge. For us, technology has always been a part of our culture. We push ourselves to think differently. Technology allows us to push forward on that and covid has given us the opportunity with the openness to change. We don’t want to slow down on that, just because restrictions relax.
Do you have any regions across the province that are exciting for investors?
Ryan: My quick answer is any destination within 2-3 hours from your home. Immerse yourself in a new environment. Whistler continues to be a very special place. What’s happening in the south Okanagan, a bit farther away, is very exciting.
Cameron: I like to break it down to primary VS secondary homes. For primary homes, you have to look at employment centres – Kelowna and Victoria likely being the two outside of Vancouver. Those centres will continue to grow. For secondary homes (recreation homes), we will see more demand as Baby Boomers pass their wealth on. There is very fixed supply in these regions, like lakefront and Whistler.
Cameron: MLA is a strong advocate for growth. But we understand that Vancouver is special because we have a diverse and strong urban planning environment. We appreciate that Vancouver needs a diversity of housing. This region is very fractured and there’s not a consistent vision. Short term thinking is making it difficult. We need infrastructure that will open up our city. We need a regional plan for our growth – sensible density and logical locations. What concerns me is that we won’t sort this out as no level of government is thinking long term.
Ryan: We need strong leadership. We are going to struggle as long as we have leadership that prioritizes votes over the good of the community. We need to attract top talent and having amenities and housing helps us do that. That takes strength of leadership.
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