Highlights from a Vancouver Real Estate Conference

Recently Mark Ting attended the Land Rush 2018 conferencewhere a panel of experts gave their opinions on what 2018 had in store for lower mainland real estate buyers, sellers and investors.  Below is his interview with CBC’s “On the Coast” guest host Michelle Elliot where he discusses what he learnt at the conference.

In our past discussions you have said that Single Family Homes (SFH) prices are dropping while the condo market remains hot, did the panel agree with you on those points?

Yes, they thought that high-end SFHs prices would drop by about 20% this year but that condos under $800,000 will continue to sell and be subject to multiple offers.  There are a lot of condo projects coming on line in the upcoming months which should help with the supply crunch, but overall they still believe that the “affordable” condo market will remain hot.

What were they recommending people to buy?

Condos—both on the high and low end.  $3 million+ downtown condos built by famous architects are considered “cheap” by global city standards as prospective buyers compare them to condos built in New York, Paris or Tokyo—not Richmond or Delta.  These buyers don’t have affordability issues, they have plenty of cash, and their main concern is the preservation of capital.
To them, it is like buying an expensive piece of art.

For the rest of us, we have to do a lot more due diligence then we did in the past. You need to really look at the area, not just now but what it will look like in the future. They were recommending buying condos in the Tri-cities, South Delta, Surrey, Langley New West and Chilliwack.

What did they have to say about how the mortgage stress test or all the new real estate related taxes introduced by the government will affect prices?

All the changes have added to a feeling of uncertainty in the market for both buyers and sellers.  Typically uncertainty means people sit on their hands and take a “wait and see” approach. That’s what’s happening in the single-family home market; sellers haven’t lowered their prices yet while buyers are patiently waiting for a better deal.  The result is a lot fewer houses being sold.

Overall the panel was long-term positive on real estate.  They argue that strong migration into BC will continue to prop up both the housing and rental market.

What were their thoughts on mortgages?

They talked a lot about mortgages and how hard it is to qualify.  They are recommending locking in for the long term as rates are still low but are going up.  One broker said that it takes twice as long and double the paperwork to get someone qualified.  It is no longer about getting the best rate rather; it is about just getting approved. And I agree with this, last year for the first time ever, I extended my mortgage and locked in for seven years.

If you were a first-time buyer, after hearing what the experts said at the conference, is there a particular area you would be looking at?

Assuming I had about $300K to spend, I think there is still value in Surrey Central area.  I said the same thing after last year’s conference, and since then prices jumped 50%, but it’s an area that still intrigues me.  Even Whalley, it’s a neighbourhood with lots of issues, but it’s slowly changing for the better. It’s close to Skytrain, has several big developments planned, millions in public and private dollars are being spent there, and you still get a decent “bad reputation” discount.

Many of our current most coveted real estate neighbourhoods started off with a checkered past.  Places like Yaletown, Gastown, and Mt Pleasant all used to be where drug addicts and sex workers congregated before these areas got gentrified. Many believe the same thing could happen in Whalley.

What about first-time investors? What would you suggest for them?

For first time investors, your number one consideration should be cash flow.  Finding a cash-flowing property is hard to do in the Lower Mainland, but notit is possible.   I don’t mean to sound like a broken record, but I’d be considering Surrey Central or Whalley as they can cash flow and have the potential for capital appreciation.

If you are feeling a little more adventurous, you might consider out of province—more specifically Edmonton.  It has been depressed for several years now but is showing signs of bottoming out, and you can buy a brand new two bedroom and den condo for $245,000.  A unit like this would rent out for $1500/month. Great cash flow but I wouldn’t expect too much capital appreciation; prices don’t move nearly as fast as they do in the lower mainland.

Any other conference takeaways that you would like to discuss?

One statistic that stuck out in my mind had to do with density.  We often complain about the size of new condos by calling them closets or shoeboxes.  One panellist who builds social housing in the third world said that an average family of 5, living in the slums of Mumbai occupies a space of just 44 square feet.  To put that perspective a 1500 square foot condo in Vancouver, which many would consider cramped for a Canadian family of 4, in Mumbai, that same space would house 170 people.   To me that was the shocking stat of the conference, I can’t imagine that so many people crammed into just 1500 square feet.

Listen to the full interview here with CBC’s On the Coast. The interview with Mark Ting starts at the 1-hour 27-minute mark.