The delay of new condo launches amid the housing downturn in Vancouver and surrounding Lower Mainland housing markets is only going to intensify housing-affordability issues, a new report suggests.
MLA Advisory, the research branch of marketing firm MLA Canada, says 17 concrete condo projects have postponed launching sales so far this year, keeping an additional 5,000 pre-sale units from coming to market.
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“These concrete pre-sale project delays, along with decreases in housing starts by up to 20 per cent province-wide, will have drastic longterm implications on our housing supply, affordability and home ownership,” writes Suzana Gonclaves, a partner at MLA Canada as well as its chief advisory officer, in the report.
In separate report published this January, MLA had forecast developers would launch roughly 14,00o units in concrete projects this year. It has now downwardly revised that total to about 9,000.
“This shortage in our housing stock will greatly impact affordability in the years to come,” the most recent MLA report concludes.
High-rise condos are typically concrete, but some mid-rise buildings are also made of the material while others are wood-frame. Of the 10 projects that MLA says were launched in April, half were wood-frame condos in West Coquitlam, New Westminster and Langley.
Some 20 percent of the 865 pre-sale homes released in April have sold. “We would prefer to see this number closer to 25–30 per cent within the month to make the remainder of sales needed to hit financing requirements more manageable over the nine month time frame,” MLA Advisory explains in the report.
The units developers sell — technically homebuyers put down deposits and enter into agreements to take ownership at a later date — before shovels break ground help them obtain financing for construction. If there isn’t enough interest from homebuyers, a project can be further delayed or shelved.
So far this year, developers have brought more than 3,800 pre-sale units to market, which represents a 23-percent decline compared to launches over the same period in 2018. In May, developers are expected to add another 703 units across 10 projects.
While slow overall sales have been a concern, some segments are performing better than others. There has been considerable interest from end-users in entry-level homes located within affordable markets, MLA notes.
In an attempt to drum up sales, some developers have been offering incentives, including more generous deposit requirements and decorating allowances to homebuyers.
“For example, Kira by Woodbridge Homes in West Coquitlam is offering purchasers a 10 per cent deposit, which has been very well received by all buyers, along with spacious floorplan and close proximity to transit lines,” says MLA.