Province snaps up social housing; private investment still strong

 

Back to buying

The province’s $12.5 million purchase of the Jubilee Rooms at 235 Main Street in June and the more recent purchase of Woodwynn Farms in Saanich are a change of course from before last year’s provincial election.

BC Housing was shedding assets at the time, though communications staff attached to the province’s housing minister, Rich Coleman, at the time couldn’t provide data on how many properties BC Housing had shed. However, staff did tout a commitment of $920 million to build and renovate approximately 5,300 units of affordable rental housing across B.C.

But in a turnaround during the fiscal year ended March 31, 2018, BC Housing bought 1,019 housing units across the province, up from 462 in the previous year. It was unable to disclose a purchase price last week.

The acquisitions rival the spree that took place a decade ago. Having cancelled hundreds of social housing units after winning the 2001 election, the BC Liberals launched a major housing initiative, Housing Matters BC, in fall 2006. The initiative came as housing prices skyrocketed and housing affordability disappeared.

RBC Economics reported at the time that an apartment purchase required 38.4% of a typical household’s monthly income, up from 26.1% five years earlier. (This compares with 51.4% of monthly household income today.) To address the crisis, the province committed $80 million in April 2007 to buy 16 properties, including 10 in Vancouver, and in February 2008 bought a further six single-room-occupancy hotels in Vancouver for $23.7 million. The acquisitions totalled 1,039 units in 22 buildings.

By March 31, 2012, BC Housing accommodated 41,043 households in independent social housing. Today, it accommodates just 39,945 households.

Demand buoyant

The mid-year outlook for purpose-built rental properties is holding the course, with statistics tracked by the Goodman team at HQ Commercial putting this year’s aggregate values on par with last year.

“Demand remains buoyant, despite the NDP’s newly introduced taxes and rising interest rates,” the team observed last month, and numbers for the first half of the year support the claim.

Preliminary figures indicate that 89 properties with an aggregate value of more than $1.45 billion traded in the first six months of 2018. This is 7% above the same period last year, when 87 properties worth $1.35 billion changed hands. All told, last year saw more than $2.1 billion worth of transactions.

The activity occurred notwithstanding a growing supply of purpose-built rental properties in Metro Vancouver as well as a provincial rental housing task force that conducted 11 public consultations throughout B.C. The consultations left many landlords and property managers feeling excluded.

Investment trends

While the BC Real Estate Association is predicting slower economic times ahead, the latest investment trends survey from real estate consulting firm Altus Group indicates strong demand from investors and stable cap rates.

While cap rates for multifamily and industrial properties saw some compression in the first half of 2018, those for AA-class office space in the core remained stable and top-tier regional malls saw cap rates increase. Rising cap rates point to slightly less demand and a softer market for assets. A lack of available investment options means Vancouver typically posts lower cap rates, also a proxy for returns, than other centres. Altus reports that investors are choosing to look to centres such as Ottawa and Montreal in their quest for higher yields.•

pmitham@telus.net