B.C.’s 10th Largest Town – Vancouver’s West End
April 18th, 2008 Categories: West End
Vancouver’s West End is the 10th largest town in BC
Ozzie’s office called me last week for some information on the West End because I have been working in the hood since 1981. Yikes! I’m honoured and at the same time feeling like an ole vet!
Ozzie Jurock’s Real Estate Insider “We looked at the ‘10 best areas’ in Vancouver last year as well as Richmond’s Steveston and New Westminster condos as places for our investors.”
Our basic philosophy remains simple. We ask you to ask yourself: “Are you an investor or a flipper?”. Based on the answer, you go look for cash flow and a good tenant to pay off the mortgage (likely in smaller markets and apply basic principles there) or a hot, rising market area to turn deals over fast.
In terms of whether there is a good market or a bad one, we ask you not to care about the question as much as the answer to: “Are the fundamentals in place?”.
Fundamentals:
Inflation or Deflationary environment? Inflation is good for real estate and other hard assets.
Demand and Supply … What is for sale and are active listings rising and how fast are units selling compared to previous times?
Inward Migration … Both international and inter-provincial … is it rising or are people leaving? More people mean that more housing is needed.
Affordability … How easy is it for the average family to afford the average price in an area?
Interest Rates … What are they now and where are they going?
Of course we also consider other local factors, like:
1. Employment base – one horse town?
2. Unemployment rate … falling or rising?
3. Vacancy rate
4. Rent to income ratio for the investor
5. Major new happening (new highway, new employer, new pipeline, a new Walmart)
Then hopefully we come up with areas that others have overlooked or not thought about at all. From time to time we go back and take a look at previous recommendations.
One of these is the tenth largest “towns” in B.C.
It has 42,000 people in an area smaller than many villages. It borders the ocean on two sides and the finest and most famous park in the province on the other. It has world-class amenities and is a walk from the heart of the most liveable city in the world. It is a place where the rental vacancy rate is 0.5% and where you can still find freehold condos for under $350,000 and 99-year lease condos for under $160,000.
Welcome to the West End of Vancouver, a hidden gem of a real estate market that offers some exceptional opportunities for investors blinded by the glitz and shine of Yaletown and False Creek.
The average price of a West End condo has risen 16% in the last year, compared to an average of 13% for all of Greater Vancouver, and is up 109% in the last five years.
And, when compared to the average condo price on the west side of Vancouver, at $498,392, the West End still represents good value. It is possible to find condominiums in the West End for a price less than in Burnaby or Richmond, both far from the excitement and the amenities of the downtown peninsula.
This month there are 108 condominiums listed for sale in the West End for under $500,000, according to veteran Vancouver realtor Maggie Chandler, owner of Chandler Real Estate (www.maggiechandler.com), who we asked to check the recent action in the West End market.
The least expensive West End condo that sold last month was a 480-square foot studio for $200,000 in a leasehold building (more on this later), and a studio of the same size in a freehold building for $270,000.
“Forty percent of all West Side listings are still selling at the list price or above,” which Chandler notes is rare now in other areas of the city.
The average price per-square-foot of a West End condo is $584, which compares well with other downtown markets, where the average new condo price now starts at around $800. In February 49 condos sold in the West End, which translates into a three and half month supply of inventory. Of those sold last month, 37 were priced at less than $500,000. The most expensive was a three bedroom, 1,667 sq. ft. for over $1 million.
Of all the sales in February, only four had a price reduction.
Something is happening in the West End, and Chandler believes it is that buyers are re-discovering the area. The key buyers are older folks looking to either downsize or who are seeking a second home in the city. The other group is young couples who are priced out of Yaletown, Coal Harbour and False Creek but want to live downtown.
For investors, the West End presents some great opportunities, but also some unique challenges.
For one thing, many condo buildings restrict rentals, including all of the old co-op buildings west of Denman Street by Stanley Park.
Of the 171 condominiums for sale right now in the West End, only 70 are in buildings that allow rentals, Chandler found.
But David Goodman, a multi-family specialist with MacDonald Commercial in Vancouver notes “you will never have a problem renting in the West End.” (Ed. note: You just may not be allowed to in a building that restricts rentals.)
Goodman said the West End rental vacancy rate for apartments ranges from 0.1% to 0.5% and landlords find it easy to raise rents when an apartment turns over. While the official CMHC reported rent for a one bedroom West End apartment is less than $900, realistically it is closer to $1,200, Goodman estimated. And this is for older stick-frame apartment buildings, not for concrete condominiums.
Chandler tracked down examples of active listing (as of March 11) of West End condos that can be rented.
Her top pick is 1550 Barclay, a former 1982-era rental building that has been converted and upgraded to 67 condos (quite rare) and is about half sold out. It has underground parking and it is rental friendly. One-bedrooms at 600 square feet are around $350,000 (we found one listed in the building for $327,000).
Other examples of MLS-listed concrete rental condos for sale in the West End: 1435 Nelson St. at $354,900 for 660 sq. ft.; and 1003 Burnaby for $339,000 for 530 sq. ft.; and $360,000 for 675 sq. ft. at 1350 Comox Street.
When one considers that the typical price for a resale condominium in Greater Vancouver is $387,032 as of last month, the West End could start making sense.
Leaseholds: A relic of misguided anti-development drive 30 years ago, there are seven West End buildings that were sold under 99-year leases, all of which run out in 2073.
Leasehold units are cheaper, about 25% to 40% below the freehold market, and they all allow rentals. Most of them are studios and small one bedroom suites. The lowest cost listing in the West End right now is a studio in a leasehold building for $152,000, compared to the least expensive freehold listing, a studio at $279,999.
The leaseholds have hidden costs, though. Monthly maintenance fees are higher – usually more than $300 a month – than freehold, but it often includes heat, hydro and taxes. Also, as the clock ticks down on the lease, there will be unease about what will happen to appreciation.
So far, the leasehold appreciation has trailed freehold, but not by that much.
Chandler tracked one leasehold condominium that was bought in 1982 for $45,000 and recently sold for $182,000.
She notes that mature buyers/investors may be interested in leasehold condos, because they are less expensive to buy, can be rented if needed, and the leases run for another 65 years.
Co-ops: A pocket of co-op condos are all located in the pocket between Denman Street and Stanley Park. Upside is they are a less expensive than freehold, but they do not allow rentals and they rarely come to the market.
The West End is an anomaly. With 42,000 people in just 525 acres, it has the highest population density in Canada, yet despite the City of Vancouver’s drive for eco-density, new development in the neighbourhood is strictly controlled. The result is that most of the buildings are 30 years old, with many of the old walkup apartments even older. Historical note: the entire West End (District Lot 185) was bought for $550.75 in 1862.
Goodman explains that the West End has been in a political freeze for the past three decades, with very little thawing. This works in the favour of existing landlords, who enjoy a tight rental market with little new competition. Recently the City placed a moratorium on the demolition of older apartment buildings, which will keep the West End frozen.
The average price of a rental apartment building in the West End is now around $209,000 per door, up from an average of $169,000 in the first eight months of 2007, Goodman noted. Few West End apartment buildings are ever offered for sale, he said.
Goodman estimated that, on average, landlords could achieve $2 per square foot on apartment rentals.
There is some interesting action on entire buildings selling in the West End. An example is developer Bruno Wall who bought the 36-unit, 11-storey strata at 1265 Barclay Street a year ago (listed at $9.3 million). It is a leaky concrete condo building, and Wall is replacing the building envelope. Units are not expected to reach the market until next year.
These, though, are the type of projects investors may want to watch for in the West End. A unique market with a young population, few listings, and a top geographical location, the West End is positioned to ride Vancouver’s appreciation wave.
Major Point
While your investment will not cash flow, the West End of Vancouver fits our criteria as a lifestyle and fantastic living environment target – as well as having potential for continuous price appreciation. While in the West of the city more and more product is coming to the market … it can’t in the controlled West End. Add to that the rental vacancy rate being among the lowest in Canada, real estate prices are below the neighbouring market, people want to move in, and there is no shortage of jobs. Sometimes the best deals are right under your nose.
West End Snapshot as of March 2008
- Rental vacancy rate: 0.5%
- Condos on market: 178
- Median price sq. ft: $584
- Number that allow rentals: 70
- Listed under $500,000: 108
- Listed over $1 million: 26
- Lowest price freehold: $279,00
- Lowest price 2 bdrm condo: $449,000
- Avg. price increase since 2007: 16.2%
- Lowest price leasehold: $152,000
- Number of leasehold buildings: 7
when it’s time to buy or sell your West End condo, call Maggie!
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We are opposed to the development on Pendrell and Denman Street. The developer has offered 10 units to the City. There is a fundamental flaw with this offer: the people that currently live in the units would not qualify for the subsidy because they do not meet the criteria for housing as set forth by the City nor can they afford the market rents that Holly Burn charges.
The housing issues are not just about building affordable housing, it is also about controlling the escalating costs of the private market rental stock. Both the City and the province must control the private market rental industry. The capitalist free market system that we revere is failing the distribution of wealth is not evenly shared to the masses. The current way of doing things has failed as evidenced by the increase in homelessness, increases in rent.
There is a severe and desperate lack of affordable rental units in the City. Developers must recognize that they have a moral and social obligation NOT to contribute to the homeless and affordability issues that we are facing. The developers and property management companies must be compelled into a social contract with the City and Province. There is no room for the rich and privileged to live in the West End. Nor should the people that rent be forced out because of the greed of developers. This developer will make more then enough money in sales and for each rental unit that is affected the same number of units must be replaced.
If developers want to build condos then they must be compelled to offer the same number of rental units that existed prior to the development at the same rate of rent that existed prior to the development. We simply cannot afford to pay anymore then what we are paying right now. It’s not possible or realistic based on the reality of what we earn. The residents of the West End are primarily made up of service industry workers who make at best minimum wage earning a gross weekly salary of $8.00 x 44 hours a week $352.00 x 4=$1408.00 per month. The average one bedroom apartment has exceeded $900.00 a month. What are people supposed to live on? You are educated people yet you voted no to minimum wage increases? There are currently forty-five thousand people living in the downtown area – where are they supposed to go if you do not take a moral and ethical stand?
The developer wants to build yet another condo that I will never be able to afford to gain financial profit for a view that is provided free by mother-nature. I stand here to accuse the city of not looking after its residents. Why are you allowing this developer to destroy the lives of 19 people? It’s your greed and lack of wherewithal to do the right thing. Have anyone of you thought this through and taken it to the next level?
1. Where are these people supposed to go while this condo is being built?
2. Will the City and the developer off set the rental costs that these tenants will incur because they are not be able to afford the current market rental costs?
SOLUTIONS:
• The City and Province must control the rent and determines the amount to be charged for rent based on Canadian national averages for bachelors, 1 bedrooms, & 2 bedroom apartments (eg. Montreal, Ottawa, Toronto, Winnpeg etc)
• Any developer who wishes to build a condo must provide a percentage for purchase by the City at below market value to be sold to people at below market value. BUT, when the person who purchased the condo sells they must sell to the next person at below market value so it allows for others the opportunity to own (eg. City of San Francisco)
• All property management companies must set aside a percentage of rental income in a maintenance fund for renovations thus avoiding the yearly increases.
• The City and Province to create a National Housing Fund for the landlords, property managers to off set their operating costs and cover the differences
• Closing the loop holes in the Land Lord Tenant Act and fortifying the act so that Property Management companies cannot evict people for “frivolous” renovations in order to increase the rent. Any renovations deemed necessary must not cause the tenant economic hardships, loss of rental unit and be approved by government.
[...] West End is ripe for picking and it has long been my opinion that the neighbourhood is undervalued. (read my recent post which was published in Ozzie Jurock’s monthly [...]
Diana, move to Cuba, they have everything you need.
But Cal, if Diana moves to Cuba, who will wait on you when you’re in a restaurant? Who’ll dry clean your shirts, clean your house, wash your car, get you on the ski lift at Whistler and pick all that fresh fruit you love to eat in the summer? Get real, Cal – our society literally can’t operate without the working poor. Guess you hadn’t noticed – or even thought about it. Watch an amusing, but spot-on little movie called “A Day With A Mexican” and you’ll think twice about being so condescending.
[...] my recent article on BC’s 10th largest town – the West End,with a population of 40,000+, which we think has the best value in West Side [...]
Can you elaborate on:
Leaseholds: A relic of misguided anti-development drive 30 years ago, there are seven West End buildings that were sold under 99-year leases, all of which run out in 2073.
Why was it misguided and by whom?
A point of clarification – 1550 Barclay was built as a strata, and operated as rental. It was not a strata conversion.
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