Vancouver and Victoria Multifamily Investment Set to Increase: CBRE

The report noted that Ottawa’s changes to the capital gains inclusion rate created buying opportunities for purchasers who completed a sale with vendors who were inclined to sell before June 25, 2024.

CBRE reviewed the investment activity following this, and noted that out of the 61 apartment properties that transacted in Metro Vancouver and Greater Victoria, 29 of those sales made up 45 per cent of the year-to-date transactions and they closed in the month of June.

Multifamily cap rates throughout B.C. increased slightly in Q2 of 2024, with increases recorded across each regional average asset class aside from retail cap rates which remained constant.

CBRE noted that the expansion of cap rates was influenced by motivated seller deals driven by the capital gains inclusion rate increase. In most instances, this yielded lower accepted pricing in order to take advantage of higher net proceeds before the cutoff on June 25.

Apartment rents in Canada reached record highs in the first half of 2024, with average asking rents for all residential property types reaching an all-time high of $2,202 in May, surpassing $2,200 level for the first time.

In terms of asking rents, they rose 9.3 per cent annually in May, which was consistent with average annual growth of 9.1 per cent during the past three years.

The latest five-year average annual growth for asking rents was 4.7 per cent when incorporating rent declines experienced during 2020 and 2021. All provinces recorded annual increases in apartment rents for purpose-built and condo rentals. British Columbia had the highest average asking rent of all the provinces at $2,526 in May 2024. In Vancouver, total average asking rents were the highest in the country at $3,008 with bachelors at $2,317, 1-bedrooms at $2,684 and 2-bedrooms at $3,729.

“Mid-year sales activity and pricing reflects both the demand for and confidence in the B.C. multifamily asset class from both local private investors and national institutional investors,” said CBRE Vancouver vice president Greg Ambrose. “With further rate cuts expected over the coming quarters, confidence is returning to the investment market which is starting to show signs of recovery.”

In 2023, housing starts were down with 223,513 units recorded, in comparison to 240,590 in 2022. Canada saw significant population growth in the past three years growing by 1.27 million people in 2023, up 3.2 per cent from 2022 and surpassing 41 million people in the first quarter of 2024.

Housing starts however, are still hovering around 240,000 and predicted to decline due to high interest rates and construction costs.

The Federal Government has returned to stimulate Multi-Family Rental development through CMHC and the Housing Accelerator Fund after a 35 year hiatus. CMHC is estimating approximately 240,000 housing starts for 2024 and while this seems positive, many of these new starts will be purpose built rental units that will never be available for purchase.

CBRE noted that pressure on rents and affordability are likely to continue as a result.