Multi unit House

In a real estate market that rarely seems to cool off, buyers often have a hard time determining good value in Vancouver.  What is the best area to buy in?  Where is the best return on investment without sacrificing that family neighbourhood feel?  The answers are hard to find in such a dynamic market but, by looking into the right trends, we can often help you identify the best area.

Right now, multi-unit properties in the Uptown Vancouver neighbourhoods are starting to emerge as the best value in town.  What?  Where?  Why?  Let us explain:

Multi-unit properties are typically old-timer, character homes built in the early 1900’s that have much more square footage than allowed in today’s building code.  They’re often situated in a duplex, triplex, or apartment zoned area and contain 3 or 4 separate units.  This setup provides a lucrative opportunity for investors looking for solid rental income or young professionals wanting to buy a house with tenants paying for most of their mortgage costs.

After an eye-opening appreciation of detached houses West of Oak Street in 2011, prices in the Westside reached an all time high creating a huge gap between Westside and Eastside values.  With Main Street becoming ever so trendy and popular, young families are now looking for affordability and equity growth potential in areas that provide tree-lined streets, proximity to shopping, great parks, easier access to downtown and out of town, schools nearby, and many more conveniences.  In other words, that feel of Westside living but for a fraction of the price!

The Uptown neighbourhoods expanding from Cambie to Knight Street between 33rd Avenue and Broadway along with the Commercial Street corridor have been the hottest pockets in the city this Spring.  Many houses continue selling well above the asking price and multiple offers are very common.  They range from $800,000 (land value) to $1,200,000 and keep rising.  These are 2 or 3 level homes with basement suites (or potential to put one in) that provide young families the opportunity to get away from strata living and own a piece of land in Vancouver.

All that said, multi-unit properties in the same area are taking long to sell and prices are starting to drop.  The reason?  A combination of two factors:

  1. Investors are reluctant to buy after last year’s price hike that resulted in an appreciation of 15 – 20% in most parts of the Westside.  A lot of them expect a price correction to occur in the near future and, therefore, are on a wait-and-see mode. 
  2. Couples wanting to live on one of the units and rent the others are finding that the banks have tightened the requirements to obtain a mortgage based on rental income and final approval is more difficult to obtain. 

These are the two main buyer segments that purchase multi-unit properties and, since they’re not out there snapping up the supply, sellers have to make them attractive by lowering prices or settling for a lower offer.  The ladder is where the opportunity lies!

Since January 1st, the MLS system has produced 41 multi-unit listings in the before mentioned areas with 19 of them still for sale today.  The amazing and tale-telling number is that only 10 properties have sold this year!!!  That’s less than 25% of the listings!  The others have been taken off the market so, what we have now is about 10 months’ supply (if sales continue at the same pace of just 2 per month).  Will the current listings take that long to sell?  Extremely unlikely since the Vancouver market historically adjusts quickly once prices fall.  On top of that, we have regular houses in the same area selling in multiple offers with prices rapidly approaching the value of multi-unit properties ($1.3M - $1.5M).  This is a classic buyer’s market but, chances are, it will be short lived.

Once a pattern of falling prices is established, they eventually reach a point where buyers see good value and start buying again.  Multi-unit properties are on the brink of that and, by then, the best opportunity to obtain a great deal is gone!  Competition for the properties comes back and prices rise again.

Prices are definitely correcting in Vancouver and it has everything to do with the value gap between the West and East sides.  If the same type of houses 10 - 25 blocks apart have a price difference of $500,000 to $800,000, it’s obvious that the market will adjust.  In Vancouver’s case, the Eastside is appreciating while the Westside corrects.  Multi-unit properties on the Westside are listed around the $2 million range.

Typically, having equity of $300,000 to $600,000 on a condo doesn’t get a buyer approved to finance a home with a price tag of $1,500,000 to $2,000,000 on the Westside.  It’s only natural that people are moving east and multi-unit properties are clearly the best value today.

Marcus Maia 
Dexter Associates Realty