Banking city land in the mother of all housing booms

Developers buying entire blocks in Vancouver as land deals double property values

The 6100-block of Granville Street. A total of nine houses, appraised in 2014 at around $1.7 million each, sold as a land assembly for $33.4 million, an average of $3.7 million for each lot | Photo: Chung Chow

Two of Vancouver realtor Michelle Yu’s clients flew all the way from Taiwan to give her a hug when she sold their Cambie Street residential lot for $4.3 million after other realtors had estimated its value at $1.8 million.

Yu, born in Hong Kong and educated in Toronto, is a Re/Max specialist in selling multiple adjacent residential lots – referred to as assemblies – in Canada’s mother of all housing booms.

By keeping acutely aware of Vancouver’s official community plans, forging close ties with developers and working exclusively for vendors, she is known for doubling the values of houses along the hot real estate corridors of Vancouver’s west side.

An example is nine contiguous lots she assembled recently along the south end of Granville Street, the airport-to-downtown artery. In July 2014, the BC Assessment Authority said the single-family lots were worth about $1.7 million each. Yu banked them into a single development parcel that sold this year for $33.4 million, or an average of $3.7 million per lot.

Doubling of values is common if a land assembly is successful, Yu said. Often, a block of Vancouver house owners will get together and agree to sell their properties as a single land play, she said. “Then they call me.”

Yu meets with her architect and city planners to ascertain the land’s development potential. She notes that the city’s official community plan is posted online so it is easy to determine if higher-density zoning is possible.

The official community plan, for example, may suggest the land could be developed to a 2.5 floor space ratio, meaning that a 10,000-square-foot single-family lot is suddenly 25,000 square feet of potential townhomes that can sell for $900 per square foot.

While the profits can be startling, land banking does present challenges, said Yu and other agents familiar with Vancouver lot assemblies.

Yu said the house owners have to wait at least a year as rezoning applications inch through the jam-packed Vancouver planning office.

While the homeowners can’t sell the properties in the meantime, they can reap even more money if the rezoning results in a higher density than was expected, Yu said.

Yu, who often deals with investors from China, said the majority of such buyers finance their Vancouver real estate through Canadian banks, even if they have enough cash for the purchase.

Mark Goodman, a principal at HQ Commercial, who sold a five-building city block in Vancouver’s affluent Kerrisdale community to a developer in mid-March for $26.3 million, said individual owners are not always on board with development plans.

Goodman is working with a developer on a controversial 11-lot land assembly in East Vancouver that shows how land banking is being done when there is “resistance.”

When some of the single-family house owners balked at selling into the land assembly, the developer swooped in to buy the two key corner lots, “which locked down the site,” Goodman said. The developer paid $1.6 million per lot, or about $600,000 above neighbourhood values. All the other owners then agreed to join in.

“It’s a gamble for the developer,” Goodman said, since city rezoning has not been finalized. Meanwhile, the two house owners that sold first continue to live rent-free in their homes while the rezoning process drags on. In other cases, Goodman said, homeowners who agree to sell as part of an assembly within a year can be paid up to $100,000 to remain in the queue if the rezoning is delayed. “And that is non-refundable,” Goodman said. Homeowners have also negotiated bonus payments of $75 to $150 for each square foot of density achieved through rezoning. “All that flows right back to the house owner.”

Yu, who has handled about 20 Metro Vancouver land assemblies over the past two decades, expects the exuberant pace of land banking – and price acceleration – to continue. “It is up and up,” Yu said, “for 10 more years or even more.”