Real Estate Investing in British Columbia

Real Estate Investing in British Columbia

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If you’re looking to start or expand your real estate investments, understanding where British Columbia fits into the overall Canadian real estate market is key. This province is home to over 5 million Canadians, drawn to the scenic views, bustling metropolitan areas and thriving economy. British Columbia is located on Canada’s west coast and abuts the Rocky Mountains, offering sweeping views of the sea, snow-capped peaks and lush forests. It is also home to Metro Vancouver, one of the nation’s hottest housing markets and home to its robust film industry.

Table of Contents - Real Estate Investing in British Columbia

Could investing in British Columbia be right for you? Read on to learn more about who is attracted to the province, the hot economic sectors and what you can expect when you dive into the market.

British Columbia’s key features and demographics

British Columbia was first settled by the British in 1843 and has quickly become a thriving part of the country. It is the third most populous province, and the metropolitan Vancouver area is the third-largest in Canada, and, the second-largest in the Pacific Northwest, just after Seattle, Washington and ahead of Portland, Oregon. The province covers nearly 945,000 square km of land and is flanked by the Pacific Ocean to the west and the Rocky Mountains to the east.

The province has a great emphasis on preserving its ecosystems, with 14 major parks and protected areas, as well as four national parks and three national park reserves. These crown jewels include Glacier National Park and the Pacific Rim National Park Reserve. As you might imagine, the province has a thriving ecotourism industry as well as plenty of opportunities for outdoor adventurers and athletes. Historically, the fur trade and the gold rush were a major part of the province’s founding and economy, and we can see echoes of this in the culture and economy today.

The population is currently over 5 million, with 2.5 million of those residents in the Metro Vancouver area alone. The University of British Columbia, located in Vancouver, is home to over 46,000 students across undergrad and graduate programs all by itself, and the province boasts many other reputable universities and technical colleges.

Recent statistics show that the province’s median household income is $76,770, right on par with the average for the entire country. About 30 percent of British Columbia’s residents hold a bachelor’s degree or higher, which is concentrated in metropolitan areas. It also has the highest concentration of visible minority populations, clocking in at 27 percent of the total population. It also has been steadily gaining in interprovincial migration, indicating that it is a “destination” province—a designation backed by its robust real estate market.

Currently, the average age of British Columbia residents clocks in at 41.5, and with nearly 16 percent of the population over age 65, it has the highest elderly population west of Quebec. If you’re looking to break into the market, you can expect that there will continue to be a great need for senior housing and ageing-in-place accommodations, with student housing and urban housing making up another significant portion of the housing need.

A focus on real estate, service and construction

British Columbia’s economy is dominated by its real estate income, making it a very hot market if you can break-in. The second and third-highest sources of the GDP are service and construction, but there is also a rich agricultural and resource extraction industry within the province. Historically, it has been a resource dominated economy, starting with the fur trade and gold rush and continuing with forestry and farming.

Because British Columbia is located on the Pacific Ocean and is the terminus of two different transcontinental railroads, there is a significant shipping and cargo industry, too.

The service industry—which, if you include real estate, makes up 72 percent of the province’s GDP—is the highest in Canada. Real estate, finance, corporate management and insurance make up the largest subsections of service professions, and most new jobs fall under the service or construction penumbra.

Of course, there’s also the film industry, which makes up a significant portion of the GDP, too. Vancouver is often referred to as “Hollywood North,” the third-largest film production area in North America, after the Los Angeles and New York City metropolitan areas. Film producers are attracted to the area for its lower filming costs, and the city is often used as a stand-in for San Francisco, California and American Pacific Northwest towns.

Overall, British Columbia is Canada’s fourth-largest GDP—studies in 2017 showed that it generated over $282 billion in income. While the province has historically experienced a boom and bust economic pattern, there is every indication that British Columbia will continue to thrive thanks to its industries, location and natural resources.

Metro Vancouver real estate market

The Metro Vancouver real estate market has long been one of the hottest in the nation, earning it the dubious honour of “Canada’s most unaffordable city.” As of February 2020, the average price for a detached single-family home in the Metro Vancouver area clocks in at an impressive 1.4 million dollars, and the average condo is priced around $677,000—compare that to the average single-family Canadian home price, which is around $500,000. In short, there is a lot of money to be made in the Vancouver real estate market, and it shows no signs of slowing down—at least in terms of price. (Home sales slowed due to the pandemic, but are expected to rebound.)

While some people were hopeful that the COVID-19 pandemic might bring the Vancouver prices back down to earth, experts predict that we won’t see a significant decline in housing costs. Although the Bank of Canada recently made cuts to mortgage rates, which makes it easier for people to obtain loans, the competitive rates will likely lead to an even more competitive market. That’s bad news for homeowner hopefuls, but great news if you’re ready to invest in commercial real estate. Vancouver has consistently had more demand than supply in recent decades, making it one of the strongest places to expand your real estate portfolio—investments made here are likely to see strong returns in the coming years, even during times of global crisis.

The breakdown between renters versus owners also indicates a hot market. Over 36 percent of Vancouverites rent their homes, and the rental vacancy rate hovers just under one percent. About 22 percent of renters spend over half their income on their rent, the highest number in the entire nation. Vancouver rent averages at around $2,000 for a one-bedroom apartment in the city centre, and around $1,600 outside of the city centre. About 45 percent of Vancouver renters fall into the age 25-34 range, with the second-highest group the age 35-44 range at 19 percent. Only 26 percent of Metro Vancouver rentals are pet friendly, meaning that if you’re willing to take the risk, offering pet-friendly accommodations could make your property even more desirable.

Finally, the average Vancouverite rakes in about $107,000 per year, which is necessary to afford the higher rent prices.

Vancouver Island market snapshot

Vancouver Island is another of Vancouver’s hot markets, home to the capital city Victoria. The capital (and indeed, the strongest real estate markets) sit on the southernmost tip of the island. The Greater Victoria metropolitan area is home to about 368,000 residents, making it significantly smaller than Metro Vancouver. The average home price on Vancouver Island is $496,000, while the average home price in the greater Victoria area is $689,000.

Victoria’s rental market is the fourth most expensive in Canada, with a one-bedroom apartment clocking in at about $1,590 per month. That market continues to grow steadily and even made a 5.3% jump between December 2019 and January 2020—only Toronto, Vancouver and Burnaby are more expensive in the entire nation. The average household income in Victoria is $59,000, and the rental vacancy rate is just 1.2 percent in the last survey, expected to reach 1.6 percent in 2020. While it’s not as hot as Metro Vancouver, it’s certainly a safe (and lucrative) bet.

Nanaimo is the other hot market on Vancouver Island, with a population of about 105,000 people. The average single-family home in Nanaimo is $566,000, which is considered significantly more affordable than other cities in the region. The average household income is about $88,000, and the rental vacancy rate is 2.2 percent, down from 3 percent in 2018—the lowest since 2002. The average 2020 rental price for a one-bedroom apartment in Nanaimo is $1,039, an eight percent increase since 2019.

Vancouver Island is home to a booming information technology industry, with over 800 tech companies operating or headquartered in the area, bringing in nearly $2 billion in revenue per year. Fishing and logging are also significant industries in the area, thanks to its location on the Pacific coast, and tourism to enjoy its beach resorts, 19th-century architecture and outdoor activities are taking off. You might be surprised to learn that out of the entire province, Vancouver Island is home to one of the most significant populations of seniors—if you invest in real estate here, you would be wise to tailor your listings and property to the over-65 set.

Other considerations

Before you pull out your cheque book and get ready to buy a rental property in British Columbia, there are a few considerations you should be aware of.

First, British Columbia imposes a property transfer tax, which you must pay before taking ownership of a property. The tax rate is levied at 1 percent for the first $200,000 of the price, then goes up to 2 percent for the remainder, up to $2 million. Residential properties over $3 million pay another 2 percent on any portion greater than $3 million. That means the average $1.4 million Vancouver home will come with about $26,000 in additional property transfer taxes—something to consider when you’re deciding on your ideal budget and mortgage requirements.

Recreational property is also experiencing a huge surge in popularity. Sales of vacation homes in coastal and other resort areas are increasing, making this an excellent time to consider investing in vacation rentals. This is partially because it’s difficult to afford homes in the urban city centres, but it also reflects the higher average age of British Columbia residents. Another large portion is young, highly-paid professionals looking for an escape from the hustle and bustle of British Columbia’s major cities. If you’re considering vacation rentals, look for properties that are within a day’s drive of major urban areas. To appeal to the most potential renters, you want a property that’s suitable for driving up on Friday evening, spending the weekend and driving back on Sunday afternoon or Monday. With the outdoorsy appeal of British Columbia’s lakes, parks and forests, your rental could have significant income-generating potential.

Summary

If you’re looking for a piece of property in a hot market, you can hardly do better than British Columbia—but that high demand and high rental income potential comes with property prices and taxes to match. This coastal province is home to a rich ecotourism industry, multiple internationally renowned colleges and a highly educated populace, making it one of the greatest destination provinces in the country. Whether you’re considering a rental in a hot market or a vacation rental in the bucolic backcountry, British Columbia has a lot of exciting opportunities for new investors and those looking to expand their portfolios.

If you’re interested in networking with other British Columbia real estate investors, there are multiple options on Meetup, including groups specifically tailored toward

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Scott Dillingham

Scott Dillingham

I have been investing and lending to real estate investors for nearly 10 years now. After thousands of successful deals between flips, rent to owns, student properties and commercial assets I have developed a deep knowledge of real estate investments and have a passion of sharing this information with the world! If your looking for a lender who specializes in rental property financing you're going to want to connect with me at team@lendcity.ca.