"Sales volumes remain steady within presale as townhomes continue to outperform and the economy recovers.” Suzana Goncalves EVP, SALES AND MARKETING; PARTNER, MLA CANADA
LAUNCHES ACROSS NUMEROUS SUBMARKETS
There were six project launches in July 2020 that released approximately 221 units to market; these projects were evenly dispersed throughout the Lower Mainland and include markets such as Squamish, South Surrey, West Coquitlam, and Vancouver West. Similar to the past few months, the majority of new project launches were townhome developments, which continue to be absorbed by end-user families. It was also positive to see amongst those project launches two larger projects – although they only released a small portion in their initial release, it shows confidence in the market overall given the projects have over 150 units in total each. In July, there were 153 woodframe condominium units and 68 townhome units released to market. In July, 13.6% of released inventory sold; this is similar to the June presale sold rate of 14.3%.
REAL ESTATE DEVELOPMENT MARKETING ACT (REDMA) EXTENSION
On April 17, 2020 the Superintendent of Real Estate amended Policy Statement 17 within the Real Estate Marketing Development Act to extend the timeframe a developer can execute “early marketing” for a new project. Simply put, every new project must secure the necessary financing to start building within 9 months of filing a disclosure statement and commencing sales. In order to obtain the necessary financing, most lenders will require a percentage of sales to be secured within those 9 months often as much as 60-65% of the total revenue of the project. For large scale projects, this limited time frame can be very challenging to work within. It is this requirement which has led to the lack of new concrete inventory in our marketplace over the past 18 months. The amendment to the policy allowed developers to extend that 9 month timeframe to 12 months but it was initially set to expire July 17, 2020. The Superintendent has since announced as of July 15, 2020 that this window would be extended until April 30, 2021. Although this extension does not eliminate the risks of releasing new inventory completely, the additional three months is indeed a benefit. Many developers are considering releasing concrete inventory this Fall provided we have no major setbacks due to Covid-19. With a potential lack of supply issue looming, some new concrete inventory in 2020 would be very welcome.
MORE OF THE SAME
The market has responded well since May and we expect to see more of the same as August holds steady. As townhome sales continue to perform well, we are seeing additional townhome projects come onto the market. We expect this trend to continue into the Fall. With this in mind, MLA Advisory forecasts that six pre-sale projects will launch sales in August; these projects will bring approximately 157 concrete condominium, 29 woodframe condominium, and 147 townhome units to market. These projects are located in Vancouver West, Surrey, North Vancouver, and Coquitlam. Most notably, August 2020 will see the first new project launch along Cambie Corridor in 24 months. As we have stated previously and with Covid-19 cases on the rise, the biggest variable will be the potential onset of a second wave which we continue to monitor closely.