The city of Vancouver has been pushing for infill development for many years but the high cost of development has home builders in a pinch. Building a luxury home in a neighborhood of starter homes tends to be counterproductive for the builder.
Buyers should always be aware of the location of their prospective property. Location has always been a cornerstone to real estate value. In general it is always better to buy the worst house on the street rather than the best house. I often have people ask me, "Why do I want the 'worst' house?" That sounds negative, but the reality is that neighborhoods drive value either up or down depending on what's happening in the area.
Buying the best house in the neighborhood is fine if all the houses in the area are similar and yours is just a tad bigger or on a larger lot. But an overbuilt house would be something like a 5500 foot English Tudor built on a street filled with 1950s 1200 foot ranch homes. That would be way over built and frankly the house would stand out in a negative way. The neighborhood of 1950s ranch homes might support values in the $300,000 range and the 5500 foot house could cost $500,000 to build. The market ceiling will tug the price down on the overbuilt property. That is counterproductive.
The opposite however can be quite favorable. A lone 1950s 1200 foot ranch surrounded by 5500 foot luxury homes allows the potential value to be very high on the little house. An addition or a serious remodel with the highest grade of materials would add more value to the home than it costs to do the work. The market ceiling in this neighborhood could be $600,000 and that leaves a great deal of potential upside for the 'underbuilt' house.
With the drive for infill development Vancouver USA is seeing this kind of neighborhood mix of properties more and more often. Development costs are so high the builders feel compelled to puff up the houses a bit with luxury designs and materials but sometimes they are pushing the neighborhood too far. There are curable problems and incurable problems and neighborhoods are often incurable. Having a house next to an interstate highway is an example of an incurable problem. Likewise there are good things about a neighborhood that could be lost in the future. For example a gorgeous stand of trees that fill an adjacent area to a neighborhood could someday be gone should that land be developed. A home next to that forest might look attractive and maybe experience a bump in value for the aesthetic value provided by the trees, but that is out of the homeowners control and may someday be gone. Paying too much of a premium for it is not wise.
I am seeing a lot of overbuilt homes for the area and buyers need to be cautious as these overbuilt homes are the first to slide in price in a down cycle. Buyers should always go in eyes wide open when considering a property. I have touched on this before including this article here.