Planned site for the Lennox by Polygon in North Vancouver.
Sales of condos and townhomes that won’t be delivered for several years have dramatically slowed to levels not seen in a decade.
Industry observers say rising interest rates and economic uncertainty are causing buyers to retreat and developers to delay projects.
“I think a lot of people in the industry are just kind of wondering what’s going to happen next. Are we in this for a while? Or are we going to see things come back next year?” asked Vancouver real estate agent Amar Pal.
In the third quarter of 2022, there were 1,522 pre-sale condo and townhome transactions, down 72 per cent from an all-time peak of 5,481 for the same period last year, according to numbers from Zonda Urban, which tracks the pre-sale market for developers.
In 2020, that number was 3,015. In 2019, it was 1,835. It hasn’t been since 2012, when sales were 1,515, when third-quarter sales of new condos were as low as they were this year, said Jon Bennest, vice-president at Zonda Urban.
It comes as buyers in other markets are also sitting on the sidelines due to rising interest rates and economic uncertainty. Altus Analytics looked specifically at sales of new condos sold in the Toronto region for September and found an 89-per-cent year-on-year decline.
On Wednesday, the Bank of Canada is expected to increase its key lending rate by at least another 50 basis points as it fights to curb inflation, likely leading to even more pressure on pre-sale condo projects.
Real estate agents in North Vancouver anticipated two projects would start pre-sale contracts this fall, but both launches have been pushed to next spring or later, examples of what has been happening elsewhere in Metro Vancouver.
Those include Lennox at Lonsdale, a project by Polygon Homes for 64 condos, and Emerald by Ebb and Flow, a development by Woodbridge Homes and Citimark for 41 townhomes. Agents say they were expecting sales centres or registrations to start around September, but they were delayed.
Developers are generally vague about why they want to launch later, preferring to keep the tone positive.
“They are never explicit. It’s an optimism game,” said one veteran agent of pre-sale contracts, who declined to be named for fear of jeopardizing his long-standing relationships with developers.
One Surrey-based realtor said a lot of projects launched in the summer and didn’t do well, but she didn’t want to mention project names. She said that most are offering huge incentives, but they are still not selling briskly, so it makes sense to put a pause on project launches.
Some developers, especially those who may have purchased land when it was less expensive, can make pricing adjustments and more easily proceed with sales than those that have less wiggle room on their balance sheets, explained Pal.
“What I’m finding is developers are not going to come to market right now if they can afford to wait. So some of the bigger projects that we kind of thought may come this fall, they’ve been pushed back, and they just said, ‘We’re not going to release right now. We know the market is not there for the numbers we have to hit to make sense on our budgeting.’ So they’re going to wait and reassess in the spring.”
Bennest of Zonda Urban is sure that third-quarter sales would have been lower in 2008 and 2009, following the financial crisis, but he doesn’t have figures beyond 2010 on hand.
He thinks the next quarter should be somewhat higher since some of the launches that didn’t happen between July and September were moved to October and “have performed reasonably well.”