Vancouver’s real estate industry concerned about thousands of unsold condos sitting empty

Executives in Vancouver’s real estate industry are warning of a glut of newly built condos sitting unsold and empty throughout the region.

About 2,500 new condos are sitting unsold and empty in Metro Vancouver, according to the Canada Mortgage and Housing Corporation (CMHC).

That number is double what it was last year, according to CMHC.

Anne McMullin, president and CEO of Urban Development Institute, says the reason is that condos cost more to build than local residents can afford.

Costs have escalated so much in the last 10 years that to build a unit is out of the price range of 80 per cent of the public in the Metro Vancouver area, McMullin said.

Developers don’t want to sell at a loss either, according to McMullin.

You’re not going to build to lose money.

She said the market had been absorbing escalating costs, including rising labour and materials costs, for years as industry professionals sensed prices would continue to rise.

But now she also blames recent government policies that have increased the cost of building.

The cost that is associated with policies at all three levels of government has made it that we can no longer build what people can afford, she said.

Some developers are now giving deposits back to buyers because they’re not meeting pre-sale targets to secure bank financing for new projects.

There’s also some developers that have actually gone into receivership because they had sold or tried to develop … as the prices were escalating.

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She said some companies are already laying off staff.

There is a potential storm coming and it’s frightening.

She said she hopes cities in the region will review their various policies and requirements, including those for non-market rental housing, energy step codes and public art.

President of Vancouver-based development company Rennie Greg Zayadi said the market slowdown has been happening since March 2022.

But, yes, over the last year it’s gotten very real, Zayadi said.

He said the real estate industry had a really good 20 years, but the recent decline in sales of new condos will have big ripple effects in the labour market.

The last time we saw this level of developer-owned unsold inventory was 24 years ago.

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Zayadi said developers have to understand that people who are spending $800,000 for a condo likely don’t want a 450- or 500-square-foot condo.

He said buyers these days are hoping to get 800- to 1,500-square-feet for between $800,000 to $1.2 million.

We need to get to a point where we can deliver inventory as an industry, as a province, at $700 to $900 a square foot. That’s $200 to $300 above where the market is today.

He said the unsold condos are heavily concentrated in Burnaby, Coquitlam and parts of Surrey.

Oleg Galyuk, real estate agent with Royal Pacific Realty, said in his experience older condos tend to sell better than pre-sale condos.

The new inventory tends to sit on the market, he said.

He said the layouts of some of the new homes are one reason for lack of buyer interest, as well as a lack of parking spaces that are harder to sell and rent.

Galyuk said developers are throwing out a variety of incentives to get people to buy built units.

They’re throwing in parking stalls. They’re throwing in storage lockers. They’re giving cash-back on completion.

He said he thinks some developers have put too many eggs into the investor basket.

Right now, a lot of condos [are] coming online that people don’t really want to live in.