Developers fear ill wind in municipal elections
Shifting political winds could exacerbate an already-softening Metro Vancouver housing market buffeted by recent government policies and higher borrowing costs, said an industry analyst at the Urban Development Institute’s annual real estate industry outlook on Tuesday.
Michael Ferreira, principal of Urban Analytics, warned that a number of Metro Vancouver municipalities could take on an antidevelopment slant after the Oct. 20 election.
“You have reason to be a little bit nervous because there’s certainly a tide of anti-development sentiment that’s building in the market today,” Ferreira told about 800 members of the real estate and development community at the UDI presentation. “I think a lot of the candidates are looking to take advantage of that and are catering to populist rhetoric.”
Across Metro Vancouver, housing affordability and density are key issues for many municipalities, with some candidates and parties critical of densification and some calling for a “pause” on development, which, argued Ferreira, would be misguided.
“Just when we are getting to the point of seeing more supply come on the market and potentially put downward pressure on pricing, that’s when some of the candidates are suggesting they’re going to cut back.”
Other candidates and parties have also expressed commitments to create more affordable and market rental housing as a solution to the housing crisis.
Ferreira said an infusion of rental housing would have an immediate impact on price. But he warned that campaign promises of a rent freeze or tying rent increases to a unit, instead of a tenant, could make some projects in the pipeline “unviable.” He was also critical of the NDP’s provincial task force that recommends tying annual increases to inflation.
“It may win political points in the short term,” he said of the NDP’s plan, but will result in lower rental supply and make developers less inclined to build.
Ferreira said there was a sense of frustration among rental developers.
Many projects were bogged down by a slow approval process, with one developer estimating it’ll take five years to complete a rental project, while some projects get scrapped or put on hold because the city demanded such unfavourable terms the developer couldn’t make the project work, he said.
“They feel like the city is just not interested in facilitating new rental development even though we have sub-one per cent vacancy rate throughout the region.”
Ferreira, who crunches data on new condos, highlighted some bright spots for the industry.
The pre-sale market remains healthy, with large projects such as Gilmore Place in Burnaby, Linea in Surrey and smaller projects along the Cambie Corridor and at UBC reporting strong demand.
These projects were done by local, experienced developers who know their market and priced their products right, Ferreira said, noting that Onni priced units at the Gilmore’s first tower at just under $1,000 per square foot, less than the $1,100 per square foot price of a nearby project that had launched earlier.
The re-sale market, however, is a different story.
The Real Estate Board of Greater Vancouver reported 1,595 sales in September, a 43 per cent drop compared to the same month last year. Sales-to-listings ratios have also dropped, particularly for condos and townhouses, which are now in a balanced market. So far, this hasn’t translated to price drops.
“We haven’t seen a lot of actual declines in prices,” Ferreira said. “But we’ve seen some softening in the form of incentives being offered to buyers” such as decorating allowances worth between $30,000 to $60,000 or reduced deposit requirements.
“If we continue to see softening in demand and increase in supply, we are going to see a drop in buyer urgency and likely start to see more softening in prices,” said Ferreira. “But I don’t anticipate a huge drop in prices, not a massive correction that we’ve seen in the past.”