Developer postpones pre-sales for high-rise towers in Burnaby and Coquitlam
New Burnaby and Coquitlam projects were unable to pre-sell 50 per cent of their units
Joanne Lee-Young
The Province
Vancouver developer Ledingham McAllister is putting on hold the launch of pre-sales for three high-rise, transit-hub condo towers in Burnaby and Coquitlam, and is considering a pause on a fourth.
The total value of the projects — Sydney, Highpoint, Azure and possibly another — is around $1.2 billion, according to company president and CEO Ward McAllister. The buildings range from 20 to over 50 storeys and include market, non-market and rental units.
McAllister pointed to a dramatic slow-down in general pre-sales, beginning last October, and estimates sales volumes have dropped by about 70 per cent.
There has been evidence that smaller, newer developers are throwing in the towel and selling land instead of riding out an increasingly tough market. And the development industry has been vocal about bureaucratic delays getting in the way of building units that will be much needed once buyers return.
Ledingham McAllister, which is an experienced and prolific builder of multi-family homes going back to the mid-1980s, is pulling back on pre-sales for projects that all “have zoning and building permits. There are brochures printed and display centres that have been built for them,” said McAllister.
The projects need to be about 50 per cent pre-sold in order to get bank financing, said McAllister, citing a threshold that is already slightly lower than the more commonly cited 75 to 80 per cent level.
And there is a clock that starts ticking as soon as pre-sales for a project open, said Jon Stovell, who is board chair of the Urban Development Institute, which represents developers.
By law, according to the provincial Real Estate Development Marketing Act, developers have to complete pre-sales within nine months. After that, they must cease marketing.
“So, developers are considering, ‘Maybe I shouldn’t launch now, if buyers are sitting on the sidelines,’” said Stovell.
Matthew Boukall, a vice president at Altus Group, has been tracking over 12 projects across the Vancouver market that “we anticipated launching either late in 2018 or early 2019 that have either delayed their opening date or shifted their marketing message to be coming soon. Out of the 12 projects, at least four have development permit approval or conditional approval, which represents over 4,000 units that we were expecting to come to market, with about 4,300 of them launching between January 1 and June 1, 2019.”
To compare, about 8,700 units were brought to market in the same period in 2018.
“It’s not like it’s never happened before,” said Hani Lammam, executive vice-president at Vancouver-based Cressey Development, citing past downturns such as in 2008. “It’s happening. We went from being an overheated market to, suddenly, a market where demand evaporated.”
“It’s simply that the average buyer is very, very concerned. There’s so much uncertainty,” said McAllister. “They’re not interested. If they buy a unit for $500,000 to $600,000 and it’s worth less later, and they are borrowing from mom and dad, or grandparents, to put down the deposit, they can’t afford to lose it.”
Pre-sales involve convincing a “significant number of people to buy, two or three years out. For the end user, someone who wants to live in it, they don’t know where they will be so far away (in time),” said Lammam. “We’ve relied on investors, who have an easier bet. A condo is a good investment. They can sell or rent it. It’s more a business decision, not a life one.”
Investors bridged the gap and made money by taking on risk, said Lammam.
The flip side is that investors were making a lot of money as prices skyrocketed. But prices were becoming unaffordable for end users, prompting various levels of government to bring in measures that have stifled demand.
On the other hand, McAllister said, “underlying things is that there is so much stimulus in the market. There are 50,000 people projected to move here. Jobs have grown. Interest rates are low. This is a beautiful place to live. There is very little finished inventory.”
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