Executives in Vancouver’s real estate sector are raising concerns about an oversupply of newly constructed condominiums that remain unsold and vacant across the area. A report by the Canada Mortgage and Housing Corporation (CMHC) reveals that approximately 2,500 new condos are currently unoccupied in Metro Vancouver, marking a doubling of last year’s figures.
Anne McMullin, President and CEO of the Urban Development Institute, attributes this surplus to the increasing cost of constructing condos, surpassing the affordability range of 80% of local residents. McMullin emphasized that the industry has been grappling with soaring expenses, particularly in labor and materials, over the past decade, making it financially unfeasible for many developers to sell at a loss.
Furthermore, recent government policies have further escalated construction costs, hindering the ability to meet the demand for affordable housing in the region. Some developers are refunding deposits to buyers due to failing to meet pre-sale targets required for securing bank financing for new projects. Consequently, layoffs have already begun in some companies, signaling potential economic challenges on the horizon.
Greg Zayadi, the President of Rennie, a Vancouver-based development firm, noted that the slowdown in the real estate market has been evident since March 2022, with significant impacts on the labor market. Zayadi highlighted the need for the industry to adapt to buyers’ preferences for larger and more reasonably priced units, as opposed to the current trend of smaller, high-priced condos.
The surplus of unsold condos is predominantly concentrated in areas like Burnaby, Coquitlam, and parts of Surrey. Oleg Galyuk, a real estate agent at Royal Pacific Realty, pointed out that older condos tend to have better sales performance compared to new pre-sale units, citing issues with layout design and limited parking as factors contributing to the lack of buyer interest.
In response to the challenging market conditions, developers are offering various incentives to attract buyers, such as free parking spaces, storage lockers, and cash-back deals upon completion. Galyuk expressed concerns about an oversaturation of investor-focused condos that may not align with the preferences of potential residents, emphasizing the need to address the mismatch between supply and demand in the market.