April 12, 2023 April 2023 Pre-Sale Report: Market Holds Steady With 35% Sales Absorption

“After months of uncertainty, our current market has revealed important truths about real estate in Metro Vancouver. First, critically low supply continues to buoy prices and give the edge to sellers, even as demand has fallen. Second, the success of presale programs is not solely dependent on current market performance but rather on the optimism of the market's outlook. As long as market conditions remain tight, we will likely continue to see prices level off and even rise with seasonal demand.” Suzana Goncalves EVP, Sales and Marketing; Partner, MLA Canada

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DOWN BUT NOT OUT – PRESALE MARKET ACTIVITY REMAINS STEADY

In March, the Metro Vancouver real estate market saw five presale launches, with 493 units released. Although launch activity was low compared to previous years, the market remained active from seasonal demand. As a result, same-month sales absorptions reached 35% in March, with 166 units sold. The major launches included Perla by Polygon, Southaven Building 3 by Park Ridge Homes, and Jacob by Redekop Faye. Internally, we noted robust demand in our Surrey and West Coquitlam programs, with interest primarily from young families and investors.

As the real estate market in Metro Vancouver continues to show signs of optimism, the supply issue will become a more significant challenge for those looking to enter the market, overtaking interest rates in importance. However, it is essential to remember that supply is relatively inelastic in the short term, meaning that it can take time for supply to respond to changes in market conditions.

We are already seeing the effects of this phenomenon in the resale market, with active supply in March hitting twenty-year lows. Despite strong demand, limited supply has resulted in benchmark prices reaching a stable level. As the market continues to recover, it is crucial for developers and municipalities to work together toward increasing supply to meet growing demand in the long run.

"ON THE COUNT OF 3" – DEVELOPERS ALLOWED TO LAUNCH AT 3RD READING.

The British Columbia Financial Services Authority (BCFSA) has introduced changes to the Real Estate Development Marketing Act (REDMA), which will affect the marketing of new development projects. Previously, developers could start marketing a development project before final approval, provided they had a fourth reading. Now, BCFSA has redefined "approval in principle" as the project having received a third reading by the municipality or equivalent stage. In addition, updates to policy Statement 6 clarify the "satisfactory financing commitment" definition, which requires a commitment of funds from a lender that is not conditional on a certain number of presale purchase agreements or sales value.

Developers must pay municipal CACs/DCCs to receive a development permit, which previously added financial exposure and risk since the fees had to be paid upfront without knowing how the project would fare in the marketplace. However, with changes to the policy, developers can now commence sales and satisfy construction financing requirements before paying the fees. Still, there are new risks associated with this, accurate estimates of development and construction costs could be difficult when the project is at its third reading, and there is a risk that projects may not obtain a building permit within the 12-month allowable window.

ALL EYES ON ME

April is poised to be a crucial month for the presale market in Metro Vancouver. With eight highly anticipated launches and over 1,700 units set to hit the market, it can be the most active month in released products for the entire year. Notable programs to watch out for include Citizen by Anthem, Curv by Brivia Group, and Sequoia by ML Emporio, all of which have been actively marketing their offerings since late last year. These projects cater to different market segments and will provide valuable insight into the current depth of buyers. As such, April's presale market is shaping up to be an exciting and important barometer of the region's overall real estate landscape.

Coming soon! Stay tuned for our fully comprehensive overview of the macroeconomics, pre-sale, and resale market video report, Pre-Sale Pulse.

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