In Vancouver’s real estate sector, executives are cautioning about an oversupply of newly constructed condominiums remaining unoccupied across the region. The Canada Mortgage and Housing Corporation (CMHC) reports approximately 2,500 unsold and vacant new condos in Metro Vancouver, which is twice the figure from the previous year. Anne McMullin, Urban Development Institute’s President and CEO, attributes this surplus to the high construction costs that surpass the affordability range of most local residents.
McMullin highlights the significant cost escalation over the past decade, rendering condo construction financially out of reach for 80% of Metro Vancouver’s population. Developers, she notes, are reluctant to sell at a loss, emphasizing the necessity of maintaining profitability. While industry professionals anticipated rising prices, McMullin now points fingers at recent government policies that have further escalated building expenses.
As a consequence, some developers are refunding deposits to buyers due to failing to meet pre-sale targets essential for securing bank financing for new projects. Instances of developers facing insolvency are also surfacing, especially among those who initiated projects during price escalations. The mounting challenges have led to layoffs in some companies, prompting concerns of an impending crisis.
The call for a comprehensive review of various policies and requirements by regional cities, including those concerning non-market rental housing and public art, is echoing within the industry. Vancouver-based development company Rennie Greg Zayadi acknowledges a market slowdown since March 2022, with the situation intensifying over the past year. Zayadi underscores the potential labor market repercussions stemming from the decline in new condo sales, reminiscent of a similar inventory surplus 24 years ago.
Zayadi emphasizes the mismatch between buyer expectations and current offerings, noting a preference for larger living spaces within a specific price range. He stresses the industry’s imperative need to deliver inventory that aligns with market demands to revive sales. The unsold condo inventory is notably concentrated in Burnaby, Coquitlam, and parts of Surrey, reflecting the widespread impact of the market stagnation.
Real estate agent Oleg Galyuk of Royal Pacific Realty observes a preference for older condos over pre-sale units, attributing this trend to layout discrepancies and inadequate parking provisions in newer developments. Developers are resorting to various incentives, such as offering parking spaces, storage lockers, and cash-back deals upon completion, to entice buyers. Galyuk also points out an overreliance on investor-driven projects, resulting in surplus units that do not align with the current residential preferences.
In conclusion, the real estate market in Metro Vancouver is grappling with a surplus of unsold condos, prompting industry stakeholders to reevaluate strategies and adapt to evolving market dynamics for sustained growth and recovery.
