This perspective from vanpro at RE Talks 22 Apr 2011 6:17am -
“In 2001/02: you could buy (woodframe, 3 storey, 1960′s/1970′s built) rental apartment buildings in Greater Vancouver and parts of FV from about 5% to close to 9% cap. rate depending on location, quality of building, deferred cap ex etc…So 5% would be in absolute best location (say Kits or West End), 7%+ in prime North Vancouver, Lower Lonsdale with city views (yes, its true – this was pre-bubble pricing), 8% – 8.75%+/-% in Surrey or other parts of FV. As pricing got higher, cap. rates fell significantly from 2003 onwards to today where we are at 2% in prime areas (on true operating income) to perhaps 4%-5% MAX in outer suburbs and FV.”
Prime rates:
2001 April: 6.5%; 2011 April: 3.0%
Here’s an anecdote from unicas on RET on commercial RE:
http://realestatetalks.com/viewtopic.php?f=8&t=59415
“I am trying to refinance a property plus business, the city assessment is 4.8 million on the property, the bank is willing to finance 75% subject to an independent appraisal. The appraiser comes up with 3.8 million based on cash flow projection and at 8.5 cap, we just dont see this kind of cap in Vancouver. yet the guy insists since there is business involved, there is higher risk premium involved. and he would not consider what city assessment is in this situation. ”
Response of MultipleOffer: “8.5 cap rate is absurd”
LOL yup a finance company for an investment needs an 8.5% cap in current market conditions. Won’t look at comparables only cash flow. The bastards! Now… an appraiser on a residential property to be rented out… now that’s completely different. It’s residential after all.