Multi-family rentals remain a safe, strong harbour

Commercial real estate investors recognize the inherent value in multi-family rental apartment buildings

Despite polarizing policies such as the foreign-home buyers tax increase, higher property taxes and caps on rental increases, the Metro Vancouver and Greater Victoria multi-family rental markets are performing surprisingly well. The two markets finished 2019 at $1.2 billion in total sales, with most of the action in the second half of the year. With positive net migration estimated at 45,000 annually, a rapidly growing tech workforce, apartment vacancy rates in the 1 per cent range and consistently higher home prices, rental apartment buildings will remain one of the safest and strongest performing commercial real asset classes in 2020 in both Vancouver and Victoria.

Capitalization rates: With a lack of land and growing competition, capitalization rates for quality multi-family assets will remain in the 2.5 per cent and 3 per cent range. For larger assets with high-equity requirements or assets that require substantial capital upgrades, cap rates may experience a slight uptick. Cap rates will be lowest within the urban core.

New purpose-built rental apartment buildings: With supportive government initiatives, attractive financing, accretive returns and a weakened condo market, private developers are increasingly shifting towards purpose-built rentals. Approximately 7,000 units.....continued at the link below

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