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British Columbia Vancouver development permits surged before building fees increase implemented

The regional fees for development had been already penciled in at $250,000 for one of Domus Homes’s major projects, a 200-plus-unit tower.

Then, as the deadline approached for dramatically increased Metro Vancouver fees, it became obvious the bill would go up to $750,000 after May 1. So Domus principal Richard Wittstock and his team went into overdrive to get all their building permits through by April 30 to save a half million dollars.

He was just one of many developers who did the same in April, pushing the volume of building permits in the Vancouver metropolitan region to $1.9-billion – well over double what they had been in April of 2018.

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The surge was so pronounced that it accounted for most of the increase in Canadian building permits over all in April, which hit almost $7-billion, an increase of 11 per cent over April the previous year.

Many who work in or watch the industry say the level of activity is unlikely to continue, though. Instead, they expect to see a general slowdown in building for some time to come.

“I would expect the current slowdown in general market conditions to curtail housing starts over the next two years. The permit spike is a blip,” said Bryan Yu, the deputy chief economist at Central 1 Credit Union.

Two recent reports produced by the credit union say that the housing market is experiencing a recession almost equivalent to the 2008 crash caused by the global financial crisis.

“The severity of the housing market sales slowdown in the region has come as a surprise. While home sales have generally stabilized in other parts of Canada, the sales flow has continued to deteriorate in Metro Vancouver,” one report said.

The report says this is happening even though the economy is relatively strong. But higher interest rates and federal and provincial housing policies, such as the changes to mortgage rules federally and the speculation tax and foreign-buyer tax provincially, are having an impact. It also notes that housing prices started jumping around 2015 because the low Canadian dollar encouraged more foreign investment.

For those in the building sector, the increased Metro Vancouver fees, which hadn’t been raised for more than 20 years until this year, are just one of the many factors wreaking havoc with their financial planning for new projects. Developers are also facing construction costs that are going up every month.

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“You now need to get $800 a square foot [from buyers] just to cover costs, even if your land was free,” said Rob Blackwell, the vice-president for development at Anthem Properties. He said there will likely be another jump in permits at the end of this year when a new $1,200-a-unit development cost charge is introduced as a new charge to help pay for transit. “There’s a real concern from everybody that the cumulative cost is a big issue.”

As well, numerous councils in the region changing their policies to either demand more rental units in new developments or more protections for renters who are displaced by development, or both.

Burnaby recently introduced a comprehensive new policy, saying 20 per cent of all new projects would have to be rental and any displaced tenants would need to be offered units in the new buildings at the same rent they’d been paying before.

Vancouver councilors spent much of Tuesday debating a plan to increase compensation and protections for renters displaced by development. New Westminster and Port Coquitlam have also introduced new policies to prevent “renovictions,” including the threat of revoking business licences.

“The last two months have been absolutely stunning,” said Mr. Wittstock, who also has projects going in North Vancouver and one in south Vancouver. “I’ve been watching to see major pullbacks.”

A recent report from MLA Realty analyzing market conditions said that several developers have cancelled presales initiatives for 5,000 units in 17 concrete condo projects, which are bigger and therefore more financially risky. MLA Realty had previously predicted 2019 would see 73 projects, comprising almost 14,000 units.

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Higher interest rates and the various federal and provincial housing policies are weighing on sales activity.

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