Vancouver residential land sales plunge 80 per cent
August 3, 2023
0.28-acre suburban land assembly in Metro Vancouver sold in May 2023
for $1.55 million. | London Pacific Property Agents
Metro Vancouver has seen an 80 per cent decline in sales of land for residential development in the first half of 2023 compared to a year earlier, according to commercial real estate brokerage Avison Young.
Sales of all asset classes, including multifamily and land, fell 72 per cent to $2.4 billion in the first half of 2023. Sales were $8.7 billion a year earlier.
“We've observed private capital taking the lead in investments, while institutional investors have been cautious with portfolio rebalancing and cash preservation,” said Jessica Toppazzini, principal and managing director with Avison Young in Vancouver.
The impact of high financing costs on development put the brakes on both residential and commercial land purchases, the agency noted.
“Some proposed residential developments prior to the interest-rate hikes were no longer deemed financially viable,” Avison Young reported. “With few profitable development opportunities, prospective buyers have been preserving cash and are more selective on when and where to deploy capital.”
Well-capitalized developers have been taking advantage of the current lending environment to pursue projects, but overall investment in residential land fell 80 per cent in the first half of 2023 versus a year earlier.
This, in turn, drove an 87 per cent decline in the overall value of land transactions as investors stuck to the sidelines.
“Stricter financing terms and rising construction-related costs have impacted development in British Columbia, leading to reduced development appetite and lower yields for developers,” Toppazzini said.
The Real Estate Board of Greater Vancouver (REBGV) noted sales of development land starting to drop with the 87 transactions in the first quarter of 2023—a 60 per cent decline from the same period in 2022.
“Not to sound like a broken record, but it’s hard to ignore the cooling impact higher borrowing costs have had on transactions in the real estate market overall, and the commercial market remains no exception,” said Andrew Lis, REBGV’s director of economics and data analytics.