Condo Presales Plummet in Metro Vancouver as Market Stalls

The condo market in Metro Vancouver is witnessing a significant downturn, with the latest figures indicating a sharp decline in both presales and new project launches. According to data from MLA Canada, only 35 projects were initiated between January and July 2023, marking a staggering 40 percent drop from the five-year average. This trend reflects a broader stagnation in the real estate sector.

Sales figures during this period have also plummeted, with fewer than 400 units sold—an extraordinary 85 percent decrease compared to historical averages. In July alone, 572 units were introduced to the market, a decline of 33 percent from the five-year average for that month. The market is currently grappling with a surplus of over 4,000 unsold condo units, either completed or nearing completion, as reported by Rennie Marketing Systems.

Demand Stagnates as Developers Seek Solutions

In light of these challenges, a coalition of developers in British Columbia is urging both the federal and provincial governments to reconsider regulations surrounding foreign buyers. They believe such measures could help rejuvenate activity in the presale market. However, the B.C. government swiftly rejected this appeal, highlighting existing research that indicates how restrictions on foreign buyers have cooled a previously overheated market. This has left local buyers, particularly those with average incomes, struggling to enter the market.

The contraction in new projects is not just about numbers; it also involves the scale of developments. In July, there were only eight new presale projects launched in the Lower Mainland, with most being smaller, wood-frame buildings located in the Fraser Valley. Barrett Sprowson, senior vice president of residential at Peterson Real Estate, characterized the market as “very stagnant.”

Compounding these issues, high interest rates and decreased foreign investment have led to financial instability within the sector. Several projects are now facing receivership, including the luxury CURV tower in Vancouver’s West End and the Chloe building on the west side. Presale buyers from the CURV project have started requesting refunds on their deposits, as the developers reportedly owe over $90 million to lenders. The receiver is currently reviewing contracts to determine the next steps for the project.

Market Adjustments and Future Prospects

The situation has prompted a critical reassessment of land values and project viability. Michael Ferreira, senior vice president at Anthem Properties, noted that land prices have inflated considerably, leading many developers to overpay for sites. This “reckoning” is essential for stabilizing the market and establishing realistic valuations for future projects.

To assist developers, the B.C. government recently introduced changes allowing for deferrals on increases in development cost charges until project completion. Ferreira remarked that while these adjustments are a step in the right direction, they do not significantly address the core challenges facing the industry. He emphasized the need for “bold and significant initiatives” to truly revitalize the market.

The current environment has prompted some developers to pause their plans for future projects. Ferreira, who previously founded Urban Analytics, highlighted the urgent need to reconsider policies related to foreign buyers. “It’s not just a developer who has a fancy suit and drives a fancy car. It’s everybody he hires and all the trades and suppliers,” he stated, citing the layoffs occurring in related construction companies.

As the market continues to navigate these turbulent waters, the future remains uncertain. The interplay of local demand, regulatory measures, and economic conditions will be crucial in shaping the trajectory of Metro Vancouver’s condo landscape in the coming months.