Metro presale condo market slows as buyers retreat and developers delay

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Condo and townhouse sales that have not been delivered for several years have slowed dramatically to levels not seen in a decade.

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Industry watchers say rising interest rates and economic uncertainty are causing buyers to back down and developers to delay projects.

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“I think a lot of people in the industry are just wondering what’s going to happen next. Have we been at this for a while? Or will we see things come back next year?” asked Vancouver real estate agent Amar Pal.

There were 1,522 presale transactions for condos and townhouses in the third quarter of 2022, down 72 percent from an all-time high of 5,481 in the same period last year, according to figures from Zonda Urban, which tracks the presale market for developers.

In 2020 there were 3,015. In 2019 there were 1,835. “Since 2012, when sales were 1,515, third-quarter new condo sales have not been as low as this year,” said Jon Bennest, vice president of Zonda Urban.

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Because buyers in other markets are also sitting on the sidelines due to rising interest rates and economic uncertainty. Altus Analytics specifically looked at new condo sales in the Toronto area in September and found an 89 percent year-over-year decline.

On Wednesday, the Bank of Canada is expected to raise interest rates by at least another 50 basis points as it fights inflation, likely putting even more pressure on pre-sale condominium projects.

Real estate agents in North Vancouver expected pre-sale deals to begin this fall for two projects, but both starts have been pushed back to next spring or later, examples of what’s been happening elsewhere in Metro Vancouver.

These include Lennox at Lonsdale, a 64 condominium development by Polygon Homes, and Emerald by Ebb and Flow, a 41 townhouse development by Woodbridge Homes and Citimark. Agents say they expected sales centers or registrations to start around September, but they’ve been delayed.

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Developers are generally vague about why they want to launch later, preferring to keep the tone positive.

“They are never explicit. It’s a game of optimism,” said a veteran presale deal representative, who declined to be named for fear of jeopardizing his long-standing relationships with developers.

A Surrey agent said many projects started over the summer and were not doing well, but declined to give project names. She said most offer great incentives, but they’re still not selling fast, so pausing project launches makes sense.

Some developers, particularly those who bought land when it was cheaper, can price adjust and proceed with sales more easily than those with less wiggle room on their balance sheets, Pal explained.

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“What I’ve found is that developers don’t come to market now if they can afford to wait. Some of the bigger projects that we thought might be coming this fall got pushed back and they just said, ‘We’re not going to release now. We know the market isn’t there for the numbers we need to hit to make sense of our budgeting.’ So they will wait and reassess in the spring.”

Zonda Urban’s Bennest is certain that sales would have been lower in the third quarter of 2008 and 2009 after the financial crisis, but has no figures beyond 2010.

He believes the next quarter should be slightly higher as some of the launches that didn’t happen between July and September were pushed to October and “performed pretty well.”

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