Executives in Vancouver’s real estate sector are raising concerns about an excess supply of newly constructed unsold condos across the area. Approximately 2,500 new condos in Metro Vancouver are currently vacant, as reported by the Canada Mortgage and Housing Corporation (CMHC), marking a twofold increase from the previous year.
Anne McMullin, the president and CEO of Urban Development Institute, attributes this surplus to the escalating construction costs that surpass the affordability range of most local residents. She emphasized that the expenses have surged over the past decade, making it financially unfeasible for 80% of the public in Metro Vancouver to purchase these units.
McMullin highlighted that developers are reluctant to sell at a loss and expressed concerns about the economic challenges looming ahead. She pointed out that recent government regulations have further inflated building costs, rendering it unattainable to construct properties within the financial grasp of the populace.
The industry is witnessing developers struggling to meet pre-sale targets for bank financing, leading to some companies refunding deposits to buyers and a few entering receivership due to the market dynamics. McMullin stressed that layoffs have already commenced within some firms, indicating a potential crisis on the horizon.
Greg Zayadi, the president of Rennie, a Vancouver-based development enterprise, acknowledged the market deceleration that commenced in March 2022 and intensified over the past year. He underscored the profound repercussions of declining new condo sales on the labor market, noting that the current level of unsold developer-owned inventory has not been seen in 24 years.
Zayadi emphasized the mismatch between buyer preferences and the offerings in the market, with buyers seeking larger living spaces at more affordable prices compared to the current condo dimensions and pricing. He urged the industry and province to strive towards delivering inventory within the $700 to $900 per square foot range to align with buyer expectations.
According to real estate agent Oleg Galyuk from Royal Pacific Realty, older condos tend to have better sales performance compared to pre-sale units, as the latter often struggle to attract buyers due to layout issues and inadequate parking provisions. Developers are resorting to various incentives, such as offering parking spaces, storage lockers, and cash-back deals upon completion, to stimulate demand for the existing inventory.
Galyuk expressed concerns over an oversupply of condos tailored towards investors rather than end-users, resulting in a surplus of units that do not align with current market demands.
