Condo developers perk up as buyers return to presales
What a big difference a few months can make in the new condo presale market. There is renewed buyer interest and more projects are selling out as the impact of tight supply, surging prices in the resale market and low interest rates finally spills over from the detached single home sector.
But the outcome for developers, buyers and real estate agents at two presale projects illustrates how tricky it has been navigating the pandemic and adapting to the very sharp, recent upturn in the presale market.
For much of 2019, sales had been frozen. For most of 2020, they stayed weak as other parts of the real estate market boomed.
In November, Denna Homes cancelled its Apex project of 276 condos and townhomes in a North Vancouver highrise. After sales fell off a cliff as COVID-19 cases started to rise, Denna returned down payments to buyers instead of holding onto them, said Dan
Thomson, vice-president of marketing.
It didn't look as if Denna would be able to sell enough presale contracts to get financing to proceed with construction, he said. The rising cost and tight supply of materials was another problem.
“We made a decision based on the information we had at the time,” said Thomson.
He recalled there were reports of more sales in the resale home market in November, but it wasn't until “come January, all of a sudden, you're hearing about single family homes that have 30 to 35 offers.
“That wasn't the case at the time. People were still buying single-family homes at relatively ask(ing) prices.”
Meanwhile, some real estate agents who sold units at the Everest Group of Companies' Centra condo tower project in Surrey, which sold mostly in 2019, had been wondering about commission fees that have been owed to them since last spring. The company
forwarded these payments to marketing firm Rennie only last week.
Sales contracts set out that Centra would pay 50 per cent of the commissions owed to real estate agents 30 days after the company filed an amendment statement and received a building permit, which it did in February 2020. The remaining would be paid upon completion.
Real estate agent Becky Zhou, who sold five units at Centra, hasn't heard directly from anyone at Everest or Rennie yet, but is glad to hear the commission
cheques are en route. Like other agents who had been wondering if they would be paid, she sees the payments as a sign the project will proceed rather than continue to stall or be cancelled. Her clients each paid deposits of 20 per cent of the full price.
The company said that shortly after it filed a disclosure and received a building permit, the province declared a public health emergency and Centra came to a standstill.
“We, like other developers, faced a reduction in the number of workers allowed on site, uncertainty
surrounding the shipment of building materials, as well as other moving parts, all of which had a cascade effect, including a delay in paying realtors,” said Francisco Ignacio, vice-president of operations at Everest Development Group.
Now, he said, with low interest rates and shrinking options in the hot resale market, Everest is looking to relaunch presales and break ground on the Centra project this spring, with a new target of completing the project in about two years.