Sales of apartment buildings soar in '05

.....realtor David Goodman reports.

And the overall value of the buildings sold in 2005 was almost $648.5 million, 95 per cent higher than the value of apartment real estate that was sold a year earlier.

Goodman said that although rent increases have not kept pace with rising real estate values, "[the demand] is just a question of many investors around the world being very desirous of real estate [in Greater Vancouver]."

The statistics Goodman has compiled show that the Vancouver market recorded a slightly higher number of transactions, at 83, than suburban markets, where 79 buildings changed hands.

However, the total number of suites that changed hands in the suburbs was dramatically higher. Overall, the 162 building sales in 2005 involved 5,539 apartment suites, which was a 67-per-cent increase from 2004. Some 3,572 suites were in suburban buildings and 1,967 apartments were contained in buildings in Vancouver.

While the number of buildings traded in 2005 doesn't match the late 1980s, when Goodman recalls the market experiencing some 300 transactions per year, he said the 2005 results reflect strong demand.

Goodman also said that buyers will expect to increase rents beyond the 1.5 per cent to 2.7 per cent rises in 2005 that Canada Mortgage and Housing Corp. recorded in its latest rental market report.

Goodman added that a number of his own clients have told him they "are not satisfied with the status quo" on rents.

According to Goodman's research, apartment real estate values have gone up 30 per cent to 60 per cent in five years in Burnaby, the North Shore and Vancouver's west side. Rents, however have only gone up 15 per cent.

"Something's out of whack there," Goodman said, adding that those select locations are areas that can bear higher rent increases.

Goodman said that vacancy rates in some parts of Burnaby, the North Shore and Vancouver's west side are below one per cent. He added that high migration to Greater Vancouver will help support the rental market, and keep rents up because many new arrivals will have good incomes, but "but don't have $100,000 to put down on a condominium."

Others, however, believe it will still be hard to sell Vancouver renters on higher increases, because they have rental choices in basement suites and condominiums that are not reflected in CMHC vacancy-rate statistics.

"My understanding of what's going on in the rental market is that [it] is not so tight that landlords have the power to easily pass on rent increases," said Tsur Somerville, director of the Centre for Urban Economics and Real Estate at the University of B.C.'s Sauder School of Business.

Somerville added that Vancouver's official vacancy rate has always been very low and doesn't show much variation because "very little of our rental stock" is in apartment buildings.

Somerville also cautioned that rising prices for apartment real estate could have the opposite effect to supporting rent increases.

(prepared by Derrick Penner/Vancouver Sun)