If you think the prices for new condos and townhomes being built in Port Moody and Coquitlam are reaching the stratosphere, you’re not imagining things, according to a new report by consulting firm Urban Analytics.
The Vancouver-based company released its second-quarter report for 2017 showing that prices for new multi-family construction is achieving new highs in Vancouver, with the result that buyers are flocking to outlying suburbs such as Port Moody and Coquitlam — and further east — to get their foot in the door.
In some cases prices for condos and townhouses are doubling and tripling over what they were just a few months or years ago, according Michael Ferreira, managing principal of Urban Analytics.
“Port Moody is a great example," Ferreira told the Tri-City News. "You went a long time without any new supply in the market. Once you did see supply, it’s just continued to skyrocket. That has a ripple effect. Coquitlam will go up. If prices go up in Coquitlam Centre, prices in PoCo will go up. It’s a bit of a ripple effect and a vicious cycle. It continues to push people out where they can afford and it adds to the traffic problems.”
Using information gleaned from developers and city planning departments throughout Metro Vancouver, the Urban Analytics report shows that there was very little unsold inventory left in already built new projects.
In fact, by the end of June there was only one suite available to purchase in all of the Tri-Cities.
PRICES RISING THROUGHOUT METRO VANCOUVER
As a result, prices for new multi-family projects just coming on the market are rising, with a new condominium product released in the Burquitlam neighbourhood selling on average at $820 per square foot. A new wood frame condominium project launched in the last few months achieved $610 per square foot near Coquitlam Centre and a wood-frame project being built in PoMo is being sold at more than $700 per square foot.
In contrast, a wood-frame building constructed in PoMo, called The Station, launched in 2011 was sold on average at $420 per square foot, Ferreira said.
“That’s from 2011. You’ve got six years difference, but it’s still a significant increase in pricing since their last project.”
Port Moody Mayor Mike Clay agrees a shortage of inventory is contributing to higher home prices and acknowledges that the slow pace of approvals is contributing to the problem. Vancouver, he says, sets a low bar because of the long wait time for processing, but suburban cities aren’t much better and PoMo is as bad, if not worse, than the rest.
“We used to be quite a bit faster, we used to be most expensive and fastest, now we’re still expensive and were one of the slowest,” Clay says.
To get applications moving more quickly, the city is fast-tracking smaller, non-controversial projects, hiring temporary help and updating its zoning bylaw and introducing a policy and formula for community amenities so developers know what to expect.
“Let’s rejig our department where someone who grabs the easy ones can say ‘let’s go, then then take Flavelle out of that stream so a single story rancher doesn’t have to wait for a 3,000 unit project,” Clay said.
SLOW PACE OF APPROVALS
But the slow pace of updates to the city’s zoning bylaw has been one big stumbling block, Clay said, and he knows of one developer who wants to build much-needed rental housing but has faced hindrances because the rules are outdated.
He worries that developers of rental properties will go elsewhere unless Port Moody can speed up its application processes and provide some certainty.
“It’s frightening for me. We have a tonne of opportunities (going on elsewhere) why aren’t we in this game?”
And he says the city, including council, needs to take some of the the blame for what he calls a “perfect storm” of issues that has led to escalating housing prices.
Meanwhile, a similar story of high housing prices is being told in Burnaby, where a new condo project launched in Metrotown was being sold for between $1,025 per square foot to $1,100 per square foot, and even in the Surrey City Centre area, prices achieved $775 per square foot, an example of the “irrational pace of price escalation in the market,” the Urban Analytics report states.
The report also goes on to cite rising prices in New Westminster, the North Shore, Ridge-Meadows, Langley/Cloverdale and South Surrey/White Rock.
Ferreira said new projects are taking too long to be approved and there is not enough competition to keep prices reasonable. As a result, speculators are moving in, purchasing pre-sale contracts in the hope of flipping the unit to take advantage of price increases.
“It’s a bit of a perplexing situation that we’re seeing,” he said, noting that the foreign buyers tax implemented last year didn’t seem to impact prices.
A fear of “missing out” is propelling buyers — including end-users, parents purchasing for the kids and investors — into the market.
PROPERTIES HELD FOR PRICES TO RISE
Developers are taking advantage of the situation, he said, by charging as much as they think the market can bear while also, in some cases, paying more than the property is worth and sitting on it until the market is hot enough to build and make a profit.
“They will put a community garden on it, so they don’t have to pay the commercial tax rate, and it’s keeping the product off the market. If they both [city and developers] moved things more quickly we’d see a bit of a different situation in terms of the market,” Ferreira said.
The report suggests this kind of heated market is not sustainable, however it’s monitoring closely several new product launches in 2017, including Platform in Port Moody.
A scan of new developments coming down the pike in Coquitlam shows roughly five town house projects in the works, five wood-frame projects and six large condo projects, many with attached rental homes, amounting to well over 4,000 units.
Mayor Richard Stewart said in an email that the problem of affordable housing is a “massive challenge” that every Metro Vancouver city is facing.
“Right here in the middle of the region, the shortage is quite acute and price increases is a predictable result,” he said. “Coquitlam is doing all we can to advance the construction of needed housing, particularly around SkyTrain stations, and there are thousands of units in the stream and under construction. We want to ensure that there is sufficient housing for families that are currently trying to find a place to buy or to rent. I wish there was a quick fix and better acceptance for needed development.”
