Construction is well underway at Juno, a 341-unit condominium project in north Surrey by StreetSide Developments.
“We launched sales last spring, and we hit pre-sales in four months in, 60 per cent pre-sales,” said StreetSide vice president Jonathan Meads.
Juno was one of the last big projects in Metro Vancouver to hit that pre-sale target required by banks before the bottom fell out of the region’s new condo market.
“We’ve lost the investor-buyer, new first-time buyers,” said Meads. “The condominium market is absolutely dead right now. I can’t paint that in a good picture. And it’s not just me, it’s everybody.”
Vancouver realtor Steve Saretsky is seeing it too.
“It’s pretty much at a standstill. I think that getting enough sales to hit your construction financing targets is near impossible in these conditions,” said Saretsky. “I think for anyone that’s trying to launch today or is early in the process – it’s effectively dead.”
With buyers on the sidelines, StreetSide has shelved plans to build another 1000-unit new condo development in Surrey.
“When we look at the affordability and the launchability of the project (we ask): Can we launch at the price points that we need to demonstrate to the bank are reasonable for us to go ahead? And at the moment we’re not there,” said Meads.
“I think every developer that has the ability to put things on hold is putting them on hold,” added Saretsky.
That’s not good news for governments that have been arguing for years that the best way to tackle the housing affordability crisis is to build more.
“The City of Surrey, like others, is trying to meet their targets,” said Meads.
“Mayor (Brenda) Locke has said, ‘I’ve got this many permits sitting ready for pickup.’ But the environment, the economic conditions, do not suit those developers – ourselves and others – picking up those permits and going ahead. So it’s on pause.”
Not only are new pre-sale projects on hold, developers are having a tough time selling units in recently completed buildings, with buyers looking to cheaper resale units instead.
“Developers can only reduce so much before the project becomes unprofitable and unviable. So, I think the challenge we’re seeing is that the resale market is just moving way quicker and adjusting way faster than the development space,” said Saretsky.
The glut of unsold new condos on the market in Metro Vancouver pales in comparison to Toronto.
“If we think it’s bad here, it’s a bloodbath there,” said Meads.
“It’s a market that’s worse. But I think it’s a cautionary tale. I think that Vancouver is not in those dynamics today, but I don’t think we’re a whole lot better,” said Saretsky.
Builders here say all levels of government could jumpstart new home construction by once again allowing some foreign ownership and reducing the fees and taxes developers have to pay.
“City fees and taxes are about 20 to 25 per cent of the cost of new housing in this province,” said Saretsky.
“The way I look at it is, if the car industry which employs one tenth of the construction sector across the country says, ‘we’re in trouble,’ they get bailouts of billions of dollars,” said Meads. “It’s time for a housing bailout. And I’m not trying to offend any level of government, I’m saying that to me, it is a solution.”
Meads knows the public may recoil any the idea of bailing out developers.
“I think people think developers, they drive Bentleys and live in West Vancouver. I don’t do either,” he said. “But the bottom line is we are required by the bank to demonstrate profitability for financing.”
Right now, launching a new condo development simply isn’t profitable, so it’s not happening.
“If we come back to that core element of trying to build homes and make them affordable, if we don’t make some of these changes, don’t address these gaps, don’t address these costs, we will see less homes being built rather than more,” said Meads. “And therein lies the problem.”
