Investors driving the trend prefer smaller, high-return units
Vancouver’s condo market has been heavily influenced by investors, and new data from Statistics Canada (StatCan) revealed that their preference for smaller units has played a major role in shaping what gets built.
Investors tend to favour smaller units because they provide better returns on investment, with higher rents per square foot. These units are also easier to purchase and allow investors to spread their financial risk over multiple properties.
More than half (58%) of new condos classified as investment properties in 2022 were under 600 square feet, while only 39% were larger than 800 square feet, according to the StatCan report.
In comparison, condos built in the 1990s had a median living space of 912 square feet, while those built after 2016 have shrunk to 790 square feet.
A key reason behind this shift is the role investors play in the pre-sale market. Developers rely on pre-sales to finance their construction projects, and since investors are often the first to buy, their preferences shape the type of condos that get built.
Smaller units, which are easier to sell and rent, often dominate new developments because they appeal to investors looking for a quicker return.
Jon Stovell, president of Vancouver-based developer Reliance Properties, noted that investors like small units because they’re easier to buy, and they spread the investment risk.
He added that smaller units also offer a “safe price point,” which appeals to a wider market of renters or potential buyers.
Lifestyle choices are also influencing this trend of shrinking condos, particularly among younger people who prioritize living in central locations over having more space. As a result, developers continue to build smaller condos to meet both investor demand and buyer preferences.
Read next: Will Toronto's condo oversupply lead to bigger price drops?
While the investment-focused market has led to a proliferation of small condos, it has also made it harder for first-time homebuyers to enter the market. Many are priced out, especially as investors snap up affordable units.
“This new Statistics Canada report highlights how real estate investors can be on their second or third helping in British Columbia, while first-time homeowners still struggle to get a plate,” Andy Yan, director of the City Program at Simon Fraser University, told Vancouver Sun.
Make sure to get all the latest news to your inbox on Canada’s mortgage and housing markets by signing up for our free daily newsletter here.
