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episode # 292

This Lagging Market is the Best Investment in Vancouver with MLA Canada’s Ryan Lalonde & Cameron McNeill

Six months ago, today’s guests forecasted that prices in the Lower Mainland would see double digit increases in the next 1-3 years. This has already come true. Now they are back with another bold prediction about a lagging market that has the potential to play catchup in the coming months. And the increases may shock you. Ryan and Cameron join Adam & Matt in the studio for a wide-reaching conversation about all things real estate with a focus on today’s opportunities. The time to act is now so listen up!

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Episode Summary


 

Can you tell us about yourselves?

RL: We specialize in the sales and marketing of multi-family residential, mostly in the Lower Mainland and the Fraser Valley. Our role is to work with development partners and help them bring projects to life. We want to understand the needs of the home buyers in those areas and bridge the gaps. We’ve been in business for over 20 years; Cameron and I have played a role in building some of the most sought after real estate in Canada. That is a privilege. 

What’s the difference between MLA and other presale marketing players?

CM: We are in one of the most sophisticated condominium development cities in the world and we take pride in being able to excel in this arena. We also are very respectful of our fellow players in this arena. One thing we’re very conscious of is maintaining our vision. We’re clear about what we stand for. We are trying to create meaningful real estate experiences for our stakeholders and consumers of housing. We stand apart when we’re able to do that consistently. 

RL: We spend a lot of time putting relationships with our development partners first. We want to understand their vision and work to bring that to life. We also hang our hat on our technology and advisory skills. We have full time analysts and design personnel to really understand the communities and home buyers we’re engaged with. 

CM: On the technology side, we always want to be relevant and pioneering. It’s a constant evolution for us. When covid hit, we were ready with that technology, so it was an easy acceleration of the work we were already doing. We didn’t have to pivot and we didn’t miss a beat. We’re very grateful we were on top of technology at that time. 

RL: The industry had adopted this idea of “if it’s not broken, don’t fix it.” But we took advantage of the opportunity we saw. We launched MLA Oi to deliver a more innovative online experience. We rolled that out in April/May 2020 with huge adoption from our clients. It changed the way that we market homes. 

We’ve been adding layers ever since and have now begun to roll out a home buyer portal in the most recent version of MLA Oi. 

Let’s talk about downtown. It is lagging behind other markets. What’s happening?

CM: We recently released a project downtown, Block, that is doing well. We knew we were entering a market that is in the recovery stage, lagging behind other areas in the Lower Mainland. But we believe downtown is always going to be the primary energy centre of Western Canada. When employment surges and immigration flows, downtown Vancouver will catch up. 

Downtown is still a very under-supplied market. The rental market has recovered very quickly already. So we do believe the downtown condo market will recover and surpass the highs of 2016 in the next 12-18 months. 

The luxury market across the board has also lagged. Did that contribute to downtown softening?

RL: The last ultra-luxury building to presell downtown was The Butterfly in 2017. It was about $3000/square foot and had a great brand behind it. We believe luxury real estate is a function of foreign investment and international travel. So the speculation tax did have a short term impact but we do expect the luxury market to do well downtown in the next 18 months. There’s more demand today than there has been in the past. And as the world opens up, we’ll see that market start to do well. 

We get excited about the resale values downtown. 12 months from now, we’ll look back and think Block was a great buy today. So the offers today have tremendous value for the future.

Is presale a litmus test for market confidence? 

I think it’s a symptom of a massively under-supplied marketplace. Our provincial and municipal leaders have made a commitment to restricting that supply, whether purposeful or not. The end result is not enough housing fast enough, and that results in high demand for presale. We expect that to continue. 

Can you tell us more about Block and how it relates to downtown supply?

CM: We’re going to see 10,000 new jobs in downtown Vancouver in the next 4-5 years and we simply don’t have the housing supply. There’s a gap in the market right now, especially with the resurgences of employment, immigration and confidence in downtown Vancouver. There is no supply to satisfy that. So I believe we’ll see a jump forward, stabilizing at a new plateau, another jump, etc.

We’re confident that in 12-24 months, Block will be an incredible purchase today. It’s a great medium to long term decision. 

Can we talk about price per square foot at Block and where downtown is headed?

CM: Block is currently $1700-1800/square foot. It’s one block from the new Amazon and two blocks from the water, Georgia Street and Yaletown. The vision here was to make downtown more approachable. Rumour is that 1515 by Bosa will be $2400/square foot. So we wanted to be more affordable but still a high end offering in an incredible location. I think in 24 months, we’ll be approaching $2000/square foot. 

This is an entire city block that is going to include a boutique hotel. The developer really believes in the long term potential of this location. 

RL: I think we’ll see 10-15% price increase on presales downtown in the next 24 months. Foreign travellers will come back and compare what’s happening here in Vancouver to other global markets. $1800-2000/square foot looks very cheap on the world stage. 

What about resale?

CM: I think we’ll also get to double digit increases in the resale market. There’s quite a gap between presale and resale right now but that will tighten up. 

RL: It’s such a moment in time. A full return to the office hasn’t happened. We’ve seen secondary markets run and some are still running. Every sales to listing ratio in the Fraser Valley is double what we’ve seen in Vancouver. So when would you want to buy in downtown Vancouver? Probably right now. Once the pendulum swings back, we will see prices escalate. 

On immigration and downtown:

CM: Covid has made us a closed market but we need to see ourselves as an open market. Immigration targets are set to 1.3 million people in the next three years. Immigrants will flow to prime locations like downtown Toronto and downtown Vancouver. So we don’t believe there will be any gaps. People from Metro Vancouver who are moving farther out are not leaving a hole behind. It will be filled by the biggest immigration wave we’ve ever seen. The surge is coming. And I don’t think we’re prepared to accommodate that surge. 

Let’s get more granular about downtown. Is it fundamentally changing? Are there sub-areas ripe for growth?

RL: It takes me longer to drive anywhere downtown today than it did three years ago. Downtown is probably the best version of itself and will only continue to get better. City planning is about access for the core within the core. It is built around bike and foot traffic. 

Over two million square feet of office space is being built downtown right now. That is being supported by world class restaurants and retail. You’ll have the ability to not leave your block and have a very fulfilled life. That will shift an entire community. 

CM: The city isn’t moving east; it’s growing east. Projects are filling the gaps we see. And there are so few new development opportunities. 

The other area of interest is the West End. It’s densely populated but a lot of the housing is 40+ years old. There are some new projects but density isn’t being increased fast enough. I think it is going to get cleaned up and there will be new options for residents. 

RL: There are cultural undertones to places like the West End and Coal Harbour. Yaletown has a very different vibe. Five years from now, that intersection around the Post will be very interesting. I think it will marry the grit of more eastern parts to what Yaletown brings. 

CM: As the holes in the donut of downtown Vancouver fill up, those are the areas that will benefit the most from changes in the next 5-10 years.

If someone wanted to invest in a 1+den downtown, where should they buy? 

RL: I like the old towers built 10-15 years ago along Nelson and Smithe, up to Granville. There are great corner unit plans. They’re on the fringe between Yaletown and the upcoming growth. It’s a safe investment. 

CM: A good location with good bones is key. If you’re not going to be living in it, you have to think about cash flow and appreciation. Don’t get distracted by something newly finished and instead look for long term value at the middle of the bell curve.

RL: Between resale and presale, I would choose presale at the current values. Those programs are below the opportunity cost of what we’re at today. Tower pricing has to go up. 

Who is buying downtown? 

RL: It’s not too dissimilar across all our projects across the Lower Mainland. International demand is lower than it was four years ago. The majority of our home buyers are Canadian residents, purchasing for themselves or family members, and are optimistic about where Vancouver real estate is going. The downtown core buyer isn’t very different from the Burquitlam buyer. They’re people who are committed to their neighbourhood and where it will go. 

Find out more:  

https://mlacanada.com/ 

https://podcasts.apple.com/ca/podcast/real-estate-intelligent/id1569434370 

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