Rising rents attracting investors in Vancouver

[Julie Toh]

Article from the Canadian Real Estate Mag dated Oct 26, 2015

High demand coupled with a lack of inventory. Sound familiar? That combination is not just the domain of the residential housing market, but also the multi-residential property market in Vancouver, as investors, big and small look to get a piece of the action.

According to Avison Young’s Fall 2015 BC Multi-Family Investment Report, demand for multi-residential properties in Metro Vancouver and throughout the province remained exceedingly strong in the first half of 2015. Private buyers – both local and foreign – and, to a lesser extent, institutional investors and REITs, were increasingly willing to accept record pricing and highly compressed capitalization rates as the cost of entry to British Columbia’s coveted multi-family real estate market.

Rising rental rates in Vancouver are also proving to be an incentive for investors to secure multi-family assets.

“For the most part, rents in general have not kept up with the rapid rise in the value of multi-family properties in Metro Vancouver,” said Avison Young Principal Rob Greer. “The public’s increasing willingness to rent – due to the difficulties many people are encountering getting into the region’s expensive real estate market – and forego property ownership is pushing many would-be home owners who are able to afford higher rental rates into the market.”

According to the report, multi-family investment activity rebounded in the first half of 2015 with 26 deals (more than $5 million) valued at $370 million compared with 20 transactions totalling $186 million in the back half of 2014. Multifamily investors’ first-half performance in 2015 was on par with the levels of activity in the first half of 2014, which featured 23 deals valued at $396 million.