UDI Pacific - “Fraser Valley Market Outlook”

A Focused Conversation on the Market for New Multifamily Homes in the Fraser Valley

June 19, 2014

INTRODUCTION

DEFINITON OF THE FRASER VALLEY

DEVELOPER OVERVIEW

MARKET OVERVIEW – SALES

MARKET OVERVIEW – PRICING

MARKET OVERVIEW – INVENTORY

MARKET TRENDS

PROJECTIONS

Agenda

Fifth Avenue was founded in Surrey, British Columbia.

For the past 35 years we have been developing our project sales and

marketing expertise in the Fraser Valley and throughout Metropolitan

Vancouver.

2 out of every 3 projects we market are located in the Fraser Valley. We

are expected to provide the most relevant, up-to-date real estate

information to our Fraser Valley oriented clients as we guide them and

market and sell their homes.

Introduction

As a service to our clients and the industry, each quarter we

produce and distribute a definitive report on the state of the

new multifamily residential real estate market in Metropolitan

Vancouver.

Our aim in producing this complimentary report is to stimulate

dialogue and promote positive action in our industry.

To ensure the data is collected objectively we collaborate with

highly regarded Urban Analytics (UA). UA has been tracking the

new multifamily and resale market since 1994. The data

presented in the most recent quarterly reports has been

incorporated here.

Introduction - Continued

For today’s purposes we are referring to the Fraser Valley as the growing municipalities

South of the Fraser River and North of the of Fraser to the east of Port Coquitlam.

This definition includes primary market areas including: Metropolitan Vancouver’s

emerging true “Second city” - Surrey; the Township of Langley; The City of Langley, Pitt

Meadows and Maple Ridge. It also encompasses Abbotsford, Chilliwack, and Mission.

Prospective home buyers tend to be more multicultural; less interested /impressed with

Downtown Vancouver; and may actually have more in common with folks in other medium

sized centres such as Victoria, Calgary and Saskatoon.

Developers in this market must resist the temptation to assume that the buyer wants

whatever is popular in Vancouver and/or that this buyer does not appreciate quality/style.

Definition of the Fraser Valley

Developer Overview

Tier (Based on Production Targets)

Active # of Participants

Estimated Annual Production (Units)

Approximate Market Share

Tier One – Aquilini, Aspac, Bosa Properties, Bosa Development (including Appia and Embassy included), Concert, Concord Pacific, Intracorp, Polygon, Onni Westbank, Wall, etc.

NOTE: Key to Volume is High Rise and/or Site Size

12 to 16 500 to 1,000 50 to 60%

Tier Two – Adera, Amacon, Anthem, Beedie Living, Boffo, Grosvenor, Holborn, Intergulf, LedMac, Mosaic, PCI, Quadra, Solterra, Townline, Wesgroup, etc.

NOTE: Majority do a mix of High Rise, Woodframe Apartments and Townhomes.

14 to 20 250 to 499 20 to 25%

Tier Three – Aragon, Citimark, Fairborn, Hungerford,Liberty Homes, Marcon, Omicron, Porte Development, Portrait Homes, Qualex, Walmark,Woodbridge, etc.

NOTE: Majority do townhomes, woodframe to a lesser degree and occasional high rise. Tendency to develop outside of Vancouver proper.

100+ 25 to 249 20 to 25%

For the most part all tiers of developers are active in the Fraser Valley.

However, the percentage of Tier One developers active drops significantly

as one moves to the east. This is due in part to the more limited demand

for high rise product and due in part to concerns regarding the added

complexity of conducting business in multiple municipalities.

Tier Two and Tier Three players are most active and competitive in this

broader market outside of the urban core that is developing in the

surrounding zones near Surrey’s new City Centre.

Developer Overview

Things that make you go hmmmm…

806

1096

1614

High Rise Low Rise Townhome

Fraser Valley Past Year Sales by Product Type(Approximately 3516 new multifamily

homes sold)

Market - First Quarter 2014 - Sales

High Rise Low Rise Townhome

Vancouver – Downtown 344 n/a n/a

Vancouver – West 244 71 0

Vancouver – East 199 76 11

Richmond/ South Delta/Tsawwassen 204 97 51

Burnaby/New Westminster 447 69 44

North Shore 58 79 0

Tri-Cities 235 69 146

Ridge Meadows n/a 74 28

Surrey Central/North Delta 89 26 196

South Surrey/White Rock 4 89 130

Cloverdale/Langley n/a 121 217

High Rise sales represent approximately 5 to 15 percent of total High Rise sales

in Metropolitan Vancouver.

Low Rise sales represent approximately 30 to 40 percent of total Low Rise sales

in Metropolitan Vancouver.

Townhome sales represent approximately 60 to 70 percent of total townhomes

sales in Metropolitan Vancouver sales. This is partly due to the supply and

pricing challenges in Vancouver Downtown, Vancouver West, Vancouver East,

etc.

One could say that the townhome in this market area is really the single family

home of choice roughly 10-20 years ago. Thus, there is sustained demand for

this type of product as long as pricing remains relatively flat.

Fraser Valley Insights - Sales

Market - First Quarter 2014 - Pricing

High Rise($ PSF)

Low Rise($ PSF)

Townhome($ PSF)

Vancouver – Downtown 660 - 740 n/a n/a

Vancouver – West 640 - 910 660 - 795 690 - 730

Vancouver – East 540 - 600 470 - 590 470 - 590

Richmond/ South Delta/ Tsawwassen 530 - 580 410 - 440 420 - 440

Burnaby/New Westminster 470 - 600 385 - 450 350 - 400

North Shore 570 - 640 515 - 540 365 - 460

Tri-Cities 390 - 440 310 - 380 280 - 300

Ridge Meadows n/a 285 - 305 200 - 230

Surrey Central/North Delta 420 - 470 300 - 320 210 - 230

South Surrey/White Rock 525 - 565 300 - 375 250 - 300

Cloverdale/Langley n/a 280 - 310 230 - 255

The above table represents the Active Sales Range in which 75 percent of all sales occurred

Price levels in the Fraser Valley have not increased and in fact have been

relatively flat or even declined since the re-set of 2009. This means that the

most affordable – and often under reported – new multifamily homes options

are available here.

High rise condominiums of equal or better specifications on transit sell for 20

to 30% less than Vancouver Downtown; Low rise apartments sell for about

30% less than equivalent product in Burnaby; and the price per square foot on

average for townhomes in Surrey/Langley is half what it is Vancouver’s

Eastside.

Fraser Valley Insights - Pricing

Market - First Quarter 2014 - Inventory

High Rise Low Rise Townhome

Vancouver – Downtown 775 n/a n/a

Vancouver – West 903 194 26

Vancouver – East 371 255 21

Richmond/ South Delta/ Tsawwassen 771 428 107

Burnaby/New Westminster 931 270 64

North Shore 365 231 9

Tri-Cities 391 363 71

Ridge Meadows n/a 291 54

Surrey Central/North Delta 616 293 293

South Surrey/White Rock 16 283 223

Cloverdale/Langley n/a 553 241

According to CMHC 25% of the standing inventory in Metropolitan Vancouver

condominiums is in Surrey/Langley. This is due in part to price competition with townhome

offerings in these areas. Simply put, a 1,000 to 1,200 square foot townhome can be

purchased for the same price as an 830 to 900 square foot two bedroom home in many

markets. This has put downward pressure on condo prices with the exception of larger floor

plans.

Overall condominium inventory in the Fraser Valley is less in total than sub market totals for

Vancouver West, Richmond and Burnaby. Of course, developers – and municipalities need

to be careful not to overestimate the demand for high rise or condominium product that is

not on transit and is further to the east of the region.

Fraser Valley Insights - Inventory

Sustained demand buoyed by parental assistance, downsizing and favorable

buying conditions overall in select markets and/or product types.

The emergence of the townhome as the “new” single family home for this

generation and attractive pricing in many locations.

Continued investor and end user interest regarding true transit oriented

developments especially those linked to education and/or retail evolution.

Affordability in market areas where press appears to be disinterested.

No concerns regarding impact of “foreign ownership” with the possible

exception of South Surrey.

5 Market Trends We Are Watching

Transit / Access – “tolls and trains”

Sustained Affordability

Interest Rates

Deposit Structures and Assistance

Impact of material costs on pricing and thus demand / absorptions

New rules regarding depreciation of built product

Demand Drivers

Affordability and place making opportunities like the riverfront in Maple Ridge will attract

downsizers and first time buyers to the Fraser Valley.

From time to time intense competition in certain markets and/or product types could

necessitate aggressive marketing tactics and lower pricing. Read: continued relative

affordability.

Emerging interest in quasi retirement developments/rentals (Chilliwack, Abbottsford,

Mission).

Continued demand for innovative solutions to make housing more affordable.

We expect 2014, 2015 and 2016 annual absorptions to meet or exceed 2013 levels. The

growth in the Fraser Valley will have a more meaningful impact on the overall market in

Metropolitan Vancouver.

Projections - 2014 to 2016

To receive the next edition of a comprehensive analysis of the multifamily real

estate market in Vancouver produced in collaboration with Urban Analytics:

a) Leave your business card with a Fifth Avenue representative

b) Visit fifthave.ca/marketintelligence

Thank You

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