Pre-sales are cruising at record lows in the Lower Mainland as homebuilders grapple with a massive shift in demand that has stalled project launches while they work to sell standing inventory.

But buyers exist for product that delivers value, an elusive amalgam of not only price but configuration and location.

“We’ve opened a couple of new projects this year, and we’ve had pretty good success in finding buyers,” said Neil Chrystal, president and CEO of Polygon Homes, which sold 22 units at its Terrain townhome project in Squamish when it launched in February.

The tally steadily rose to 40 units over 10 weeks, results Chrystal described as “pretty strong traction in today’s market.” Ditto for Stirling Block, a six-storey project under construction in Coquitlam Town Centre that has secured 50 deals over the past two months.

“If you have the ability to deliver homes at prices that are much less than they were, you’re actually finding some traction these days, which is positive,” he said. “Where we’ve priced aggressively, we’re finding traction. Buyers are coming out of the woodwork.”

And therein lies the key to renewed investment in the land market, which Altus Group data indicated fell 65% last year in Metro Vancouver to $865 million, following a resurgence in 2024 to $2.3 billion. Altus’s year-end report pointed to ongoing softness, not only in activity but pricing as court-ordered sales continued to put downward pressure on demand.

Polygon bought two sites last year it felt represented good value, but it has yet to acquire any sites this year as new home prices have continued to slide following caps on immigration announced last year and ongoing affordability concerns.

“The problem when values are falling is that it makes it very hard to understand what you can actually afford to pay for land,” Chrystal said. “If the top end price is off 20%, then you need a little bit of room on your construction cost, you need a little bit of room on land, you need room on DCCs.”

The challenge right now is that new home values continue to fall, with a knock-on effect on land deals.

“Once you find the bottom on pricing, you can engineer what you can afford to everything else, which includes land,” he said. “There needs to be a reset in demand so that the [home] buyers come back and reactivate the land buying cycle.”

The slower market is painful for many but needed, said Joe Varing of Langley’s Varing Marketing Group.

“There is nothing but opportunity today relative to where we were,” he said. “Post-COVID, between 2021 and 2023, we had multiple offers on everything, every day. Guys were out-bidding each other. They were making reckless decisions. Now, today, they have a lot more time to make the right decision.”

Meanwhile, the pressure developers are under to recoup equity – often in the face of pressure from lenders, who have proven willing to trigger court-ordered sales – means there’s a host of options for buyers.

Better Opportunities

“There are better and better opportunities coming up at sharper prices,” he said. “Better from every angle – better location, with entitlements, so you’re de-risked, and a better price.”

Owners are finding that as the market continues to correct, the original pro formas on their projects make less sense so they’re motivated to sell.

A case in point is an 11-lot portfolio within an established single-family subdivision in Langley’s Latimer neighbourhood that Varing sold Feb. 2 for $7.7 million. The offering included a mix of fully entitled as well as permit-ready lots, which the original developer was willing to let another builder take forward.

It’s not an uncommon scenario, with many doing so in the face of greater financial pressure.

“They’re better off selling the thing and paying off the debt,” Varing said.

Court-ordered land is coming to market at half the value it had at the peak of the market four years ago, and there’s still downward pressure.

“That to me sounds like a lot of opportunity,” Varing said. “The question is, you’ve got to find someone who believes what they’re buying.”

But confidence has been sapped, not just by macroeconomic factors but government policies. While much has been made of the pull-back by buyers, developers have also pulled back in the face of rising costs, government intervention in housing and growing questions over fee-simple title following last summer’s BC Supreme Court ruling on Aboriginal title.

“A lot of these issues are manufactured, and it’s [Premier] David Eby’s fault,” said Mark Goodman, principal of Goodman Commercial Inc., which is handling more land sales than ever. “He’s pitted everybody against each other, [and] he’s hurt our economy.”

Goodman launched multiple land listings as this issue went to press, one in downtown Surrey and two others in the Oakridge area of Vancouver.

But the deals aren’t being done at last year’s prices.

A listing in the Edmonds area of Burnaby is a case in point. It has an approved development permit in place for 29 storeys, but with no one building highrises, the price was slashed from $13 million to $5.8 million – suitable for a six-storey woodframe project site. It also ensures the developer the kind of margin they’re looking to build into projects – 15%-20%, versus 10%-12% a few years ago.

“Now we’re getting action. The big guys are coming out,” Goodman said. “There’s been a change in tempo, and it’s not that prices are rising. Sellers have capitulated and are meeting the requirements developers need on their profit margins, which are definitely higher now.”

Price Expectations

It’s a similar story in the Fraser Valley, where Jag Cheema of Royal LePage Wolstencroft Realty, Mission, is handling two land assemblies for the same owner. Put together a few years ago, the focus has been on identifying a price point that works for a potential developer.

The pro formas of most developers don’t justify what many sellers expect, and many landowners are better off selling their lots individually than as an assembly.

“I have had to let landowners know that their pricing expectations are just too high in today’s market,” Cheema said. “It is nearly impossible to make the numbers work when properties are individually owned. Families’ expectations are much higher than what developers can afford to pay.”

And the developers who have the confidence to buy are typically the established players who aren’t willing to overpay, especially in a market where homebuyers are under pressure.

High gas prices this spring have laid one more cost on buyers that squeeze the amount they’re able to spend on housing, keeping many on the sidelines.

“Developers can’t move forward until those folks start buying,” Cheema said.

With its cheaper prices, he hopes the Fraser Valley may be the first to recover, but Varing isn’t optimistic things are going to change before 2030.

“The government got us here by policy. The government is going to get us out by relaxing [policy],” he said, citing everything from measures designed to engineer affordability to tax hikes. “Even if we have a change in government in a couple of years, the new government isn’t going to turn things around overnight. It might take them a year, year and a half to catch steam.”

Land of Opportunity? Landowners Need to Be Price Smart in A Challenged Market by Peter Mitham | Western Investor