Set to hit the country’s largest real estate market, this year could see the micro condo taking off.
With more single people wanting homes and higher prices making some Canadian cities unaffordable for single and low income households, smaller homes may prove to be the solution.
While developers pitch a micro condo as an affordable entry point into the real estate market, it’s mostly investors that are driving the demand. Catering to a demographic of young professionals increasingly flocking to the downtown core, these neatly formed micro homes are targeted at those who can’t afford to buy in the red hot market, who spend most of their lives at work or socializing, and who are happy to live in a 500 square foot space.
At the same time, micro suites bring in higher rents per square foot than larger units, due to the fact that many renters are willing to live in a smaller space to save money and live closer to the city core. Shaun Hildebrand, vice president of condo research firm Urbanation, says condos under 500 square feet can bring in well over $3 per square foot, while the rest of the market averages around $2.50 or $2.60.
The challenge with micro condos comes in securing a mortgage. As Canada’s five biggest banks are reluctant to provide financing for units below a certain minimum square footage, they’re concerned that investors will sell off the properties if the housing market starts to slide.
“There are minimum square-footage guidelines that vary market to market, but the most important factor is the condo’s marketability,” CIBC spokeswoman Caroline Van Hasselt said in an email. Marketability is determined by factors such as the building’s location, whether the unit has a separate bedroom and whether it comes with a parking spot.
It’s not only the banks that are weary of micro-living. Vancouver’s city bylaws dictate that condo units can be no smaller than 398 square feet, although city council has occasionally loosened the restriction down to 320 for rental units only.
Jon Stovell, president of Reliance Properties, would like to see the restrictions scrapped.
“Vancouver has this tremendous affordability problem and yet the city of Vancouver has just gone completely tone deaf to these needs,” the developer says. “They’re keeping a lot of young people out of the market.”
Stovell has proposed a development at Davie and Hornby Streets that would offer a number of “nanosuites” measuring under 200 square feet. His proposal has yet to be approved by the city, as it determines whether or not the units could help with Vancouver’s affordability problem.
In the recent Demographia International Housing Affordability Survey, Vancouver was identified as the least affordable real estate market, with the median home price being $704,800.
While the potential for a micro-condo boom will be closely watched, it won’t become a reality until units are more widely available.