After years of outsized demand, Metro Vancouver’s presale housing market has slowed to a pace not seen in over a decade.

According to real estate sales and marketing company MLA Canada, only 35 projects launched in the past year — over 40% below the five-year average — and fewer than 400 presale units sold, marking an 85 per cent decline from historical benchmarks.

For Barrett Sprowson, senior vice president, residential at Peterson Real Estate, the numbers match what he’s seeing on the ground.

“I’ve said the market is stagnant (but) that was very diplomatically understated. If I were a little more honest, I’d say it’s kind of anemic and as flat as I’ve ever seen it.”

How We Got Here?

Sprowson describes the current climate as the result of a long buildup of policy and economic shifts.

“It’s the classic case of the frog in the water (slowly) getting boiled. For the longest time, the market bailed us out on many of the regulations, fees and taxes various governments have layered into the equation,” Sprowson notes.

But now, he says the bailout has stopped, and the rise of interest rates has compounded the issue, with, “The typical everyday buyer moving to the sidelines.”

And while buyers hesitate, supply from earlier cycles is now hitting the market.

“We’re starting to see a lot of the delivery and completions of projects that started in that really robust cycle coming out of the pandemic. That’s causing oversupplied inventory in the current market.”

In other words, today’s glut will work its way through, but the resulting slowdown in new project launches means supply shortages — and price spikes — could follow in a few years.

The Role of Government Intervention

One thing Sprowson highlights is the “perfect storm” of fees, taxes and levies layered on new development.

He notes that about 35%-40% of a new home’s cost is some type of fee or levy that the end user absorbs. “It’s got to a point where the buyer can’t accommodate the fees and taxes. And on top of that, we charge GST and property transfer tax. It’s tax on top of tax.”

Sprowson feels government intervention to reduce these costs is the biggest thing that could make a difference.

The British Columbia government recently announced changes to how Development Cost Charges (DCCs) are collected, allowing delayed payment schedules. But while Sprowson welcomes the move, he says it doesn’t address the fundamental issue.

“It’s helpful. It’s a good strategy and we’re all appreciative of governments listening … But like my friend Michael Ferreira at Anthem Properties said recently, ‘It’s like they’re nibbling around the edges.’ It’s not moving the bigger levers I think should be looked at.”

Without significant cost relief, he warns, many projects simply won’t start. “We essentially cannot deliver homes at a price that the market can pay or will absorb.”

What This Means for Realtors?

For Realtors working to move presale inventory, Sprowson says success comes back to the fundamentals.

“Gone are the days when you overprice a home to get a listing and the market takes care of it. Accurate, aggressive pricing will be in your clients’ best interests.”

Beyond pricing, execution matters. Sprowson says the best Realtors he’s worked with have a specific plan for every home, not a blanket approach. And they’re responsive.

“If you’re a listing agent, you’ve got to be on your showings ..… It’s not rocket science. Give good service, be efficient, be effective. Follow up. Get back to basics.”

What to Watch For This Fall?

Looking ahead to the fall presale market, Sprowson doesn’t expect a dramatic change unless a few big things shift.

For one, the federal government would have to figure out things with the US to remove the uncertainty impacting various market factors.

The second thing would be some kind of interest rate relief, while the third would be a significant move by the different governments on DCCs and other fees, regulations and taxes attached to development.

If even a couple of these things occur, he says, “Then I think things really loosen up ..… Ever the optimist I am, I believe something will shake loose, hopefully in favor of the buyer and maintaining supply.”

For now, developers like Peterson are staying active with a mix of projects across rental and presale. The company is leasing up its Revolve purpose-built rental in East Vancouver, preparing to complete another nearby project early next year, and breaking ground on a significant West Side community.

As for the broader presale market, Sprowson points to resale data as the leading indicator of recovery. “If the resale market starts pushing up towards the 10-year sales averages, as soon as people start missing out on homes and there’s multiple offers, then we’ll start seeing it.”

Until then, Metro Vancouver’s presale market looks set to remain in a holding pattern, waiting for buyers to return, government to adjust its levers or both.

Presale Market Stalled : What’s Ahead for Metro Vancouver’s New-Build Housing? by Emma Caplan-Fisher | Real Estate Magazine