A new survey by CENTURY 21 has found that two of Canada’s top three most expensive neighbourhoods — calculated by price-per-square foot — are in Vancouver.
The nationwide study found that Vancouver’s posh westside was the priciest neighbourhood in the country, at $1,201 PPSF (price per square foot), with Vancouver Downtown coming in second at $962.75 PPSF, followed by Toronto Downtown at $818.86 PPSF.
It’s hardly news to anyone looking for a place in the Lower Mainland, but in reality, prices per square foot are even higher, with many recent presale condominium projects in downtown Vancouver selling for between $1,500-$2,000 PPSF.
To calculate the price-per-square-foot, CENTURY 21 franchisees were asked to help come up with the average price-per-square-foot in their market, and tracked average square footage in sales from January 1 to June 30, 2017.
Real estate markets across British Columbia
Average price-per-square foot
these numbers should not represent accurate ppsf values for single family houses in any region for the following reasons:
-lot size is not represented here
-building age and size is not represented
This is important for a few reasons:
-if you have a massive west side lot, and a 100 year old building on it that hasn’t been touched, the vast majority of this lot will be in land value. So to say that this house is $1,200 psf is very misleading, because the house is effectively worth zero.
for condos, the century 21 analysis would work better (and is widely used by the industry). everyone can easily take the sale price of a condo and divide by the square footage. from the ppsf value, you can then make comments on:
-the area
-if the building was make of concrete or wood
-if your condo has views (20th floor condo should be more expensive than one on the 10th, with everything being similar)
-age of the building
-amenities available in the building
this is where the century 21 analysis falls short. you cannot simply divide the sale price of a house sitting on a piece of land by the size of the home. a home with a finished basement will be more than one without (with all other characteristics being the same). did century 21 study this?
typically, to value a new single family house, you would:
-calculate the lot value (which on the west side would be $2m+ for a 33 foot wide lot x 122)
-estimate the price it would cost to build a house, which these days would probably start at around $300 psf.
-so for a 4,026 sf lot (33 x 122 sf, which is one of the most typical lot sizes in Vancouver), to build a 2,400 sf house (which is typically what is allowable in an RS-1 zoned lot or 0.6 floor space ratio), that structure should cost you around $720,000.00 (before GST).
-so this is how we get our value: lot price + building cost
-in this scenario, this west side house should cost: $2,000,000 + $720,000 = $2,720,000.
-then when the developer goes to list the house, they would probably tack on at least 15% to this total cost, and then the realtor’s fee.
if I worked for century 21 and wanted to redo their PPSF analysis, I would:
-calculate land lot values only for each region (which is straightforward and can be found by sales data and assume if the house was a tear down or not). so this is just to calculate the land values. because lot sizes will vary in many different ways (exposure, size), we would just have to make assumptions and figure out the lot value for the most abundant sized lot, which in Vancouver would be 33 x 122 feet
-then I would find the sales data for home sales (land with the house) and divide into different age categories: lets say 5, 10, 25, 40+ years. again, house sizes will vary depending on many things, but we may be able to find out what the the ‘average’ house size and price would be if we were to make other assumptions. maybe we could find a correlation between 2,000 sf house sizes and 5,000 sf sizes..
-so we would have two figures:
-average land lot value (A)
-‘corrected’ average building size and the price (using assumptions)
-once you make these corrections and adjustments, you would get a more accurate PPSF, and you could divided it into different age categories
What I think was done here, is that century 21 simply took each sale price, and divided it by the building size, which doesn’t make sense.
there are condos in coal harbour that cost over $2,000 psf. so if you compare this to a west side home from century 21’s analysis at $1,200 psf, does that mean that we should all consider a west side home a bargain comparatively speaking? no..