In a feature published August 14th, Sightline Institute asks a question on many minds: why does Seattle build apartments but Vancouver, BC, builds condos? As the article notes, “last year nearly 60 percent of new housing starts in the city of Vancouver, BC, were condominiums; meanwhile, Seattle saw no new condominium buildings open.” Seattle’s lack of new condos won’t be changing anytime soon, as reportedly “less than 10 percent of all building slated for downtown Seattle in the next two years will be condos.” So, what gives? Sightline says it all comes down to economics.
In Vancouver, “apartments are saddled with an unfavorable tax code, making condos more lucrative than multi-family housing investment even despite high rental demand.” Looking at stats between 2012 and 2016, “rental units accounted for less than a quarter of housing starts . . . while condos represented over half of the city’s housing starts.” As Christian Chan, Executive Vice President of Burrard Group, recently told Buzz Talk, the lack of new apartment supply in Vancouver is supplemented by investors that purchase condominiums to rent out. Supply is far from lacking in Vancouver, as Sightline says 11,000 new condos and townhomes will hit the market in the next year alone.
Seattle, on the other hand, has made headlines recently for its anemic condo supply, as Dean Jones, President and CEO of Realogics Sotheby’s International Realty (RSIR), predicted dim days ahead for new condominium inventory. “It’s a simple forecast when you digest rising demand and zero new inventory,” he said. “Prices will rise and selection will dwindle.”
Sightline points out that a robust economy and tech jobs are bringing a record number of new residents to Seattle, and with high demand in the rental market, “apartment buildings are much more financially attractive, while condos come with bigger risks and, typically, lower returns. Compounding this profit difference is the fact that Seattle condominiums have to comply with quality assurance standards that are more demanding than those for any other type of home in Washington,” which adds undesirable additional expenses.
The Emerald City is also seeing an increased demand for in-city condominiums, and given the lack of inventory, it’s no surprise that buyers are jumping on any available opportunity to secure their slice of the Seattle skyline. As Sightline notes, NEXUS is the only active condo complex in Seattle’s pipeline, and though it won’t open until 2019, “over 75 percent of its units sold out in just two weeks – most in just one rainy weekend.”
While Vancouver awaits inventory in the thousands, Sightline says we’ll only see “about 500 condominiums come on to the market in the next two years,” in Seattle, the majority of which are already sold.
The above graph demonstrates the overwhelming preference of developers to build condominium towers in Vancouver, BC; while the lower shows the near zero new condominium developments in the Emerald City. (Graphs Courtesy of Sightline)
Despite their differences, one thing rings true for both Seattle and Vancouver: condominiums remain a cheaper option for buyers. “In the city of Vancouver, most condominiums were between one-fifth and one-third the price of typical single-family homes in April 2017. Though in Seattle condos are also less expensive than the typical single-family home, the difference is smaller than in Vancouver.”
NEXUS is now more than 80-percent sold with occupancy scheduled for mid-2019. Remaining homes are offered from the low $900,000s to more than $5 million. Prospective homebuyers are encouraged to visit the Sales Center at 2609 1st Ave to experience the fully furnished model home and explore personalization options