Land prices threaten Vancouver condo market
December 7, 2017
The price of land for multi-family residential projects in Metro Vancouver now often costs more than the construction cost for a high-rise concrete tower—and land prices continue to accelerate.
Some Vancouver condo towers are now preparing to rise from land that cost $500 per square foot buildable.
“This is very alarming. For a new 800 square foot condo you are approaching $480,000, just for land,” noted Michael Geller, a Vancouver developer and architect who consults to the development industry.
Altus Group pegged construction costs for a Vancouver high-rise concrete residential tower from $315 to $350 per square foot in its 2017 construction cost guide.
When all soft costs, such as design and landscaping, city fees, community amenity contributions, legal fees, marketing and commissions are piled on, Geller said a developer would need to sell new condos at well above $1,400 per square just to achieve bank financing, let alone a profit.
There are now 30,000 strata units under construction and a total of 120,000 in various stages of the pipeline across Metro Vancouver, according to industry estimates.
Yet prices for residential land—much of which already has a building on it—continue to soar.
In November, HQ Commercial sold a 5,400-square foot residential development lot in Vancouver for $3.8 million, or $704 per square foot.
A 30,000-square foot strip mall in East Vancouver, with the potential of residential development, was recently purchased for $712 per square foot.
“Currently the strongest multi-family market in the country, Vancouver is witnessing an unwavering insatiable investor appetite,” said James Blair, vice-president, multi-family for JLL Canada. But Blair suggests there could be a limit. “We foresee that costs per door in certain regions will continue to go up, but not dramatically. We are already at very aggressive door costs.”
Meanwhile, the City of Vancouver is trying to put the brakes on land speculation in an effort to lower prices. Its Housing Vancouver strategy, outlined on November 28 and which may come into force in 2018, is meant to “reduce over-inflated values for future development.”
Among its proposals, the city policy is considering making some neighbourhoods “rental-only zones” to calm residential land prices, and said it is working with senior government officials on “implementing a speculation or flipping tax” on residential land sales.
