National Post (National Edition)
Buyers shun new real estate projects in Vancouver
Politicians are desperate for developers in Vancouver to build more homes to alleviate pressure in one of the continent's most expensive real estate markets. There's just one problem — not enough buyers are showing up.
With mortgage rates still near their highest levels in more than a decade, some condo developers are struggling to generate enough early interest in projects to get them built. Homebuilders in the province of British Columbia are constantly against the clock: it has a law that gives them just 12 months to market their projects, collect enough deposits and secure the financing to build.
They can ask for more time — but at that point, consumers may also be able to ask for their money back. Developers have begun lobbying the provincial government to relax the rules to allow them more time to sell. And it's become common for Vancouver builders to apply for extensions to the city's deadlines on approved projects.
New home sales dipped 20 per cent in metro Vancouver last year, while inventories have climbed in recent months. New concrete condominiums jumped to 6,672 in the fourth quarter — up about a third from the previous quarter, according to the Urban Development Institute, an industry association. Unsold wood-frame condos were up 12 per cent on the quarter, and 45 per cent more than the prior year.
Banks typically ask developers to amass sale contracts that would cover 70 per cent or more of the loan amount for a highrise tower, unless the company can provide additional security.
“A lot of groups are not meeting that presale test,” Beau Jarvis, chief executive officer of Wesgroup Properties LP, said during a real estate event in Vancouver this month. “You've seen a couple of cancellations, where people are giving deposits back to purchasers.” The 12-month time limit “is perhaps starting to impede the development of housing,” he added.
Anne McMullin, president of the UDI, said her group has been pushing the government in informal discussions to lengthen the timelines for selling planned new construction. It's more than just interest rates at play. Condo projects are becoming larger and more complex, she said — partly a consequence of a push by governments and builders for greater housing density.
It's a particularly pressing issue in Vancouver, arguably Canada's most beautiful large city but also the epicentre of its housing crisis. There's a scarcity of developable land, thanks in part to its natural features — mountains to the north, ocean to the west. It's Canada's priciest major city for homebuyers, with a benchmark price of $1.2 million.
“It's never been as expensive to own a home anywhere, any time in Canada as it was in Vancouver in the fourth quarter,” Robert Hogue, assistant chief economist at Royal Bank of Canada, wrote in a recent report.
RESTRUCTURING LOANS
Renting is also a nightmare for many, with vacancy rates below one per cent. The average rent increase for two-bedroom apartments that turned over to new tenants was 34 per cent in Vancouver, last year, according to data from Canada Mortgage & Housing Corp.
Matchmaking between the increasingly stretched budgets of buyers and builders is already tricky.