QUARTERLY UNIT SALES COMPARISON. Chart 1 3,439 2,563 2,418 2,323 2,006 1,795 1,575 1, ,060 CONCRETE WOOD FRAME TOWNHOMES

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1 THE UA TAKE SECOND QUARTER 2016: #itsstillsupplystupid The BC Liberal Government s recent passing of Bill 28, which among a number of items includes a 15 percent tax on the purchase of any residential properties by a foreign entity in Metro Vancouver is a clear attempt to address the demand side of the residential real estate market in the region, but completely ignores the supply side of the housing market equation. As the charts and data in the following review of Q activity in the new multi family home sector of the market will illustrate, the new Foreign Buyer Tax demonstrates utter disregard for how miserably municipalities have failed in matching the increased housing demand in the region, which is being driven by factors such as population growth, demographic trends and the transferring of equity wealth. While the BC Liberal Government plays a dangerous game of chicken with the economy by trying to manipulate the demand side of the housing market equation, all levels of government continue to turn a blind eye to the reality that substantial price increases in the new multi family home sector of the market over the past 12 to 18 months are the direct result of the demand/supply imbalance. We fully recognize the fact there is no housing supply tap that can be turned on as needed, but the process and time required to approve and add new home supply to the market has become too complex and long. There will be no measurable price relief for homebuyers until the severe supply shortfall throughout Metro Vancouver is addressed in conjunction with a tempering of demand. Sales and Inventory Analysis Let s first consider the demand side of the new multi family home market in Metro Vancouver. Unprecedented demand for new condominiums and townhomes continued in Q as more sales were recorded in the second three months of the year than in any quarter since QUARTERLY UNIT SALES COMPARISON 1,575 2,323 2,006 1,795 2,563 2, , , ,439 CONCRETE WOOD FRAME TOWNHOMES Chart 1 Q Q Q Q Q Q Q2 2016

2 Q sales were 44 percent higher than any second quarter since Concrete condominium sales comprised just over half of the total sales of new multi family homes in Metro Vancouver during the quarter. When combined with sales totals from the first quarter of the year, absorptions in the first half of 2016 exceeded the number of sales in first six months of 2015 by 53 percent. YEAR TO DATE UNIT SALES COMPARISON 2,250 3,396 4,034 2,704 4,171 4,658 1,221 2,050 2,038 1,179 1,601 2,032 3,313 1,070 1,514 1,260 1, ,983 CONCRETE WOOD FRAME TOWNHOMES Chart While sales activity remains strongest in the urban sub markets of the region (i.e. those located north of the Fraser River), extremely strong demand for ground oriented condominium and townhome product in suburban sub markets located south of the Fraser River was evidenced by the near immediate absorption of most new projects that were launched in the second quarter. Media reports of buyers lining up outside sales centres for several days ahead of project launches were not uncommon during the second quarter. With more prospective buyers being priced out of the detached home market, there has been increased demand for townhome product throughout the region. While there was a slight increase in new townhome supply during the second quarter, the pent up demand that has built up for this product type quickly absorbed most of it. As of the end of Q2 2016, there were fewer than 400 new townhomes available to purchase throughout Metro Vancouver. To put this number in perspective, the market absorbed just over 1,400 new townhomes in the second quarter alone and nearly 2,670 units since the start of the year. It s no wonder we ve seen townhome prices rise by up to 30 percent in some sub markets in the region.

3 As illustrated in Chart 3, sales in the first half of YTD NEW MULTI FAMILY HOME SALES 2016 remained strongest 14,000 in the North of Fraser 12,000 12,968 sub markets, which 10,000 9,735 accounted for 74 percent of all new condominium 8,000 6,000 4,969 and townhome sales in 4,000 the region in the last 2,000 3,626 3,233 quarter; down slightly 0 1,343 from the 77 percent of sales these sub markets Total N. of Fraser S. of Fraser Chart 3 accounted for in the first quarter. The launch of some large comprehensive new projects in Burnaby contributed to that community comprising approximately 20 percent of all new multi family home sales in the region in the first half of this year. With a number of new concrete tower developments set to launch in the coming months, this trend is likely to continue in the second half of One of the clearest illustrations of how demand is exceeding the available supply of new multifamily homes in the market is Chart 4. Number of Units 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 QUARTERLY SALES VS. UNSOLD INVENTORY 7,565 4,668 Chart 4 Total Sales Released Inventory The spread between the number of new condominiums and townhomes sold in a quarter and the number of unsold units available to purchase at the end of each quarter continued to grow in the second quarter. To put this chart in some context, as recently as the third quarter of 2015 (i.e. less than one year ago) there were more than 1,400 more units available to purchase than

4 there were units sold in that quarter. Fast forward three quarters and there were nearly 4,700 more sales of new condominiums and townhomes in Q than there were units available to purchase at the end of that quarter. Based on the pace of sales over the past 12 months and the number of unsold units at the end of Q there is just 1.2 months of supply of new multifamily homes in Metro Vancouver. Chart 5 provides further visual evidence of how the number of sales is exceeding the pace at which new supply is being released in every Metro Vancouver sub market. There have been 28 percent more units sold in the first six months of this year than units released to market. 3,000 2,500 YEAR TO DATE UNIT SALES VS. UNITS RELEASED 2,787 Units Sold Units Released 2,000 1,500 1, ,131 1, ,484 1,231 2, ,660 1, , , Chart 5 The disparity between the number of units sold and the number released (i.e. presumably approved) is the similar across all product forms. Concrete Condominiums: 24 percent Wood Frame Condominiums: 38 percent Townhomes: 26 percent Not that any further evidence is required, but Chart 6 illustrates just how precipitous the drop in the supply of new multi family home product has been over the past year and why the market has realized such substantial price gains.

5 RELEASED INVENTORY COMPARISON 3,233 3,998 3,977 4,363 1,174 1,756 2,521 2,370 3,212 2,823 1, ,233 1,111 1,163 1, ,483 5,712 CONCRETE WOOD FRAME TOWNHOMES Chart 6 Q Q Q Q Q Q Q There are 70 percent fewer new condominiums and townhomes available to purchase at the end of Q than at the same point in This translates to just under 5,000 fewer homes available, which in a market that absorbed nearly 13,000 new multi family homes in the first half of this year is alarming. As Chart 7 illustrates, the amount of unsold new units dropped in all but two sub markets from the first to second quarters of the year. RELEASED INVENTORY COMPARISON NUMBER OF UNITS Chart 7 Q Q2 2016

6 UA is regularly asked to provide commentary on the state of the new home market in Metro Vancouver by stakeholders based outside our region, often in Central Canada. One of the most frequently asked questions asked by these stakeholders is whether they should be concerned about overbuilding in our market when CMHC reports an increase in the number of housing starts in a given month. A reference to the number of new multi family units that are completed and unsold typically eases any such concern. As Chart 8 illustrates, the amount of standing inventory in the market continued to drop in the second quarter and stood at just 122 units at the end of June. STANDING INVENTORY TREND 2,500 2,000 1,935 1,896 2,074 2,217 2,114 1,922 1,708 1,726 Number of Units 1,500 1, , Chart 8 Chart 9 portrays which sub markets in Metro Vancouver are experiencing the fewest number of completed and unsold units. Not only are there two sub markets with no standing inventory and four others with just one unit available to move into, just three sub markets have more than 20 completed and unsold units, and none of those has more than 50 units STANDING INVENTORY BY SUB MARKET Number of Units Chart 9

7 The amount of unsold inventory as of the end of Q by product type and construction status is illustrated in Chart 10. As with all other inventory metrics, the supply of unsold homes is substantially lower at all stages of construction. The fact Pre Construction inventory fell by over 24 percent and Under Construction inventory by 22 percent (after dropping by 34 percent and 48 percent respectively in the previous quarter) indicates the market is unlikely to experience any relief from the limited supply of standing inventory in the market for the foreseeable future. INVENTORY BY PRODUCT TYPE & CONSTRUCTION STATUS Chart 10 CONCRETE CONDOS WOOD FRAME CONDOS TOWNHOMES Standing Under Construction Pre Construction In spite of what some elected officials in the region might suggest with respect to an increase in the number of new multi family home projects being approved, the preceding charts clearly illustrate that whatever is being done is not clearly sufficient to meet the demand for new homes in the Metro Vancouver market. While the new tax on foreign buyers may moderate some of the demand for new condominiums and townhomes, without a massive increase in the amount of supply and the number of competing projects in the market, buyers are unlikely to see any significant relief in new home prices in the region anytime soon. Price Trends The dwindling supply of new multi family product throughout Metro Vancouver increased buyer urgency levels further in the second quarter, which in turn put more pressure on list values of all product forms in virtually all sub markets of the region. It seemed a new high for achievable sale values was set with the launch of each new project. While the fact prices continued to rise in the urban market areas is not a surprise given the sustained strong demand experienced over the past two years, the substantial increase in demand for product in the suburban sub markets during the past year has led to an approximate 30 percent increase in sale values being sought for townhome product in select neighbourhoods. As townhome prices rise, some buyers priced out of that sector have turned to more affordable wood frame condominiums as an option. There is now increasing pressure on pricing of that product form as well in the suburban sub markets.

8 Prices for new wood frame condominiums in the Fraser Valley have increased by approximately 15 percent in the past 12 to 18 months. The following summarizes the average values currently being attained and projected to be sought in the near future for various housing forms in different sub markets of Metro Vancouver: Downtown Vancouver The most recent project to launch reportedly achieved an average of nearly $1,450 per square foot. The next project likely to commence marketing is located in the Coal Harbour neighbourhood and is expected to seek average sale values ranging from $1,700 to $1,800 per square foot. Vancouver West Concrete condominium product in Kerrisdale and at UBC is now seeking average sale values exceeding $1,100 per square foot. Recently launched townhome product in Marpole and along Oak Street is seeking an average sale price of over $1.4 million. Richmond New townhome product launched in Richmond during Q sought sale values exceeding $1.2 million. Burnaby Concrete condominium product launched in the Brentwood neighbourhood towards the end of Q sought an average of $820 to $860 per square foot. North Shore Concrete condominiums in the Lynn Valley neighbourhood of North Vancouver is seeking an average of over $850 per square foot. A wood frame condominium project launched and sold out in Lower Lonsdale in Q achieved an average of over $715 per square foot. Coquitlam Recently launched wood frame condominium product in the Burquitlam neighbourhood achieved an average of $515 per square foot; approximately $100 more per square foot than would ve been attained a year earlier. Port Coquitlam Townhomes offering just over 1,300 square feet of living space are achieving average sale values approaching $600,000. Fraser Valley An increasingly limited supply of townhome product throughout the Fraser Valley sub markets has driven price increases of over 30 percent over the past year. While prices appear set to continue rising in the absence of either a substantial increase in supply or a severe drop in demand, there were signs towards the end of the second quarter of buyer fatigue over the pace and scale of price increases in the first six months of 2016 in particular. A slower pace of price increases is anticipated through the third quarter, particularly in light of the recent Foreign Buyer Tax announcement and implementation.

9 Buyer Trends There was little change in the profile of new multi family home buyers in Metro Vancouver in Q Projects in the urban sub markets continued to experience demand from a varied mix of end user and investor purchasers. The higher the price being sought by a new condominium or townhome projects, the more likely the buyer mix is to be dominated by end user buyers. The unprecedented rise in detached home pricing has led many mature and empty nester homeowners to cash out of their existing homes to purchase a new condominium or townhome while also assisting their kids purchase a home in some cases. The steady rise in new multi family home pricing has also prompted more existing detached home owners to use some of their equity to purchase pre selling condominiums to hold as an investment in the short term and for their kids to own in the longer term. The sense is that if they don t buy now, there kids will never be able to afford to own a property in the region. Higher new multi family home values in the urban sub markets has also driven more younger purchasers to seek new homes in the Fraser Valley sub markets. This increased demand has led to the absorption of virtually all new townhome product in spite of steadily rising prices. Higher demand for new concrete and wood frame condominiums by downsizers and younger priceconscious end user buyers and investors has also resulted in a drop in the inventory of both these product forms in all three South of Fraser sub markets. While non resident buyers remained active participants in the new multi family home market in Q2 2016, it will be interesting to track whether demand from non resident purchasers will remain as strong as it has been in light of the implementation of the Foreign Buyers tax, particularly those from Mainland China whom the tax appears to be the primary target of. Looking Ahead Given some signs of apparent buyer fatigue appearing sporadically throughout the market towards the end of Q and the typical seasonal drop in demand in the first two months the third quarter, lower sales volume is expected. However, with fewer new project launches expected during the summer months, anticipate limited supply levels to continue. Some of the more noteworthy projects UA expects to launch over the next two quarters and will be monitoring closely include: Cardero Vancouver Downtown The Smithe Vancouver Downtown Camellia Vancouver West Mckinnon Vancouver West

10 Avalon Park at River District Vancouver East River Park Place 2 Richmond Calla Richmond Fairwind at Hampton Cove Ladner Kings Crossing 3 Burnaby Station Square Towers 5 & 6 Burnaby City of Lougheed Burnaby Cascade at the Pier North Vancouver Juniper North Vancouver Bellevue West Vancouver Mont Bleu Coquitlam West Coquitlam Coquitlam Parker House Coquitlam Panorama West Coast Living Surrey Old School South Surrey Gabriola Park Langley/Cloverdale Cardero As always, UA looks forward to monitoring the sales progress of these and all other actively selling new home projects, and updating the data as it is collected on nhslive.ca, the web based platform of the New Home Source. In addition to the New Home Source at nhslive.ca, UA provides a variety of advisory and consulting services tailored to meet your firm s specific needs. Please call to discuss how we can assist you in the design and or positioning of your new multi family home community. URBAN ANALYTICS INC. (604) info@urbananalytics.ca