Vancouver-based developer Townline gave official notice that it’s postponing its Meridian project, a 39-storey tower with one-, two- and three-bedroom units near the Evergreen Line in Coquitlam.
Other developers, who had been scheduled to launch sales in recent months, have been more discreetly letting key dates go by without proceeding as planned. And there is market chatter about others who will join them.
It’s no wonder some developers are hitting pause, according to Michael Ferreira, managing principal at Urban Analytics, which keeps track of presale condo data.
The number of new or presale condo and townhome sales recorded across Metro Vancouver during the first quarter of 2019 represented a 56-per-cent drop from the last quarter and a 61-per-cent drop from the same quarter last year. At 1,783, it was the third-lowest quarterly sales total since 2010, after the global financial and credit crisis.
The postponing of several condo-project launches in the first quarter of 2019 meant 75-per-cent fewer units were released for sale, compared with the previous quarter.
“Highrise condo projects, which carry significant risk for developers and construction lenders, comprised the largest proportion of postponed developments,” said Ferreira in a news release.
Consultant Michael Ferreira of Vancouver-based Urban Analytics says highrise projects that carry significant financial risk for developers have hit a major slowdown.
Projects that are more dependent on buyers who are investors have also been hit hard, as investors are “more apt to stay on the sidelines and wait for what they perceive as a bottom of the market.”
This impacted some findings for the quarter. For example, there was a more significant drop in sales in the area north of the Fraser River because of the greater concentration of highrise developments there.
To compare, while highrise condo sales fell by 61 per cent year-on-year, there was only a 28-per-cent drop for lowrise condo sales.
The Real Estate Development Marketing Act requires developers to secure construction financing nine months after they file a disclosure statement, which allows them to legally sell their units. When presales were selling like hotcakes, this timeline was easy to meet.
Now, “with such a short window in which to meet presale targets required to obtain financing, developers are reluctant to launch a new project without some certainty they’ll meet those targets,” said Ferreira.
He added that the “overwhelming majority of unsold units are in the pre-construction phase, with completed and unsold units accounting for just six per cent of all unsold inventory.”
Across Metro, 93 per cent of all highrise-condo units scheduled to be completed by the end of 2020 are sold. The number goes down to 80 per cent of units being sold when looking at units that will be completed later in the third quarter of 2022.
Only in a few markets such as South Surrey/White Rock, Langley/Cloverdale and Richmond/South Delta were there more than 50 completed, move-in ready units that were unsold.
Overall, the total number of completed, move-in-ready-but-unsold units at the end of the first quarter of 2019 was 453. This figure has been increasing “moderately” and is an 18-per-cent increase over the last quarter, but still well below the high of just over 2,200 that was recorded in the last quarter of 2013, according to Urban Analytics.