Condo towers in Yaletown are seen in the background as people walk and sit along the False Creek seawall in Vancouver.Darryl Dyck/The Globe and Mail
Vancouver’s construction industry is deemed an essential service, so developers are still busy bringing their projects along. Some are continuing to work at the office, while others are holding virtual meetings with staff, architects, consultants and contractors. But the industry is bracing itself for a bumpy few months ahead, as the housing market seizes up and consumers lose their jobs.
A lot of projects are on hold, or they’re being delayed. Right now, there’s no point in launching a marketing campaign, so they’re dragging out the upfront work. If the project is under construction, they’re facing supply chain obstacles. It’s not easy to import European cabinetry with worldwide work restrictions in place, MLA Canada executive director Cameron McNeill says.
But it’s the projects nearing completion that are less certain. Developers typically require a 20-per-cent to 25-per-cent down payment on a presale, as determined by the banks. But for those buyers who’ve lost their jobs, completing the purchase has suddenly become far more difficult and there will be those who can’t do it. As well, the availability of notaries and lawyers has slowed, and finding a moving company – that’s a whole other matter.
“I have one tower completing in Brentwood in two weeks and we are communicating with the buyers, making sure they are ready and have their financing in place,” says Mr. McNeill, whose marketing company works with developers on everything from land acquisition to leasing. “I’m going to guess 90 per cent will complete and for the other 10 per cent we are going to be working hard to help them and getting creative.”
For those developers who had just launched, or were about to launch a project before the coronavirus hit, they’re dealing with the fact that the market has significantly fallen off. Presentation centres are sitting empty.
“The real problem is that this is fundamentally impacting their psyche and physical ability to buy things, so consumer behaviour has massively changed," Mr. McNeill said. “Even if they could, they aren’t buying cars or couches, or real estate, unless they have to.”
According to provincial legislation, a developer has nine months from the launch date to obtain a building permit and construction financing. Depending on the size of the project, a lender wants to see around 50 per cent or more of the building presold before approving a construction loan. That means there is tremendous pressure to sell a lot of condos, quickly, which is why millions of dollars are often spent on building presentation centres and hiring marketing companies. The purpose of the legislation is to ensure viability of the project and to protect the consumer from making a deposit on a condo only to see the project drag on. If conditions are not met in the required time frame, a developer must stop marketing. They must give buyers the option to walk away and refund their deposit. The developer then takes a huge hit on all that money spent on marketing, Mr. McNeill said.
With the market suddenly cold, projects that have already launched could be in trouble. And even after the pandemic ends, the market will likely be slow because consumers are going to be cautious. That’s why developers are asking government to extend the nine-month threshold to 18 months, Magnum Projects principal George Wong says.
Mr. Wong says that the presale market had had a relatively slow couple of years, but the market was just starting to pick up before the pandemic hit. There is still some residual activity and in the past seven weeks, he said 748 units completed in projects he’d marketed in Burnaby, B.C., and Vancouver. Only two defaulted, but they weren’t related to the coronavirus, Mr. Wong said.
“That’s a mark of strength of our lending institutions, because they got the construction loan repaid and the developers got the profit out of it, and that is encouragement for developers to continue,” Mr. Wong said.
“Short term, yes we are bracing ourselves for a wild ride – but that’s the short term,” he said. “Long term, our housing sector is strong. Every one of my developers has money set aside, they are desirous of proceeding forward and spending millions of dollars in getting the presentation centres built out, and to be in ready position when the market recovers.”
Mr. McNeill and Mr. Wong both believe that when the pandemic is over there will be a rush of new immigrants seeking the safe harbour that is Canada, with its secure health care, clean air, stable politics, respected schools and conservative banking system. The demand for housing will be strong. We’ve seen this immigration inflow in the aftermath of other world crises, Mr. Wong said.
“Right now people are getting back to Maslow’s Hierarchy of Needs: housing, food, family,” Mr. Wong says. “I think when this world recovers, it will be a new model, a new normal. I see B.C. and Vancouver taking advantage of it – and I don’t want to say that in a mercenary way, but we are intrinsically very attractive.”
But in the interim, his industry is bracing itself. In an Urban Development Institute webinar last week, president Anne McMullin said the industry was dealing with changes coming at them almost every hour. The big marketing companies are hopeful they can keep their staff employed throughout the crisis.
“I’m supporting my shop, because once we get through the short-term gulley, I see a light at the end of the tunnel,” Mr. Wong says.
In a video message to his 92 employees, condo marketer Bob Rennie says none of his staff will lose their jobs as a result of the coronavirus pandemic.Handout
Condo marketer Bob Rennie, also a well-known art collector, created a video message to encourage his staff. Seated on his couch at home, with some of his art pieces on display, Bob Rennie thanked his staff for their loyalty to his 45-year-old business and vowed to keep all 92 of them employed.
“We are going to stand by you – not just in business practices, but culturally, and I think we have to lean on each other, rely on each other and share with each other,” Mr. Rennie said. “We don’t know how we are going to come through this on the other side, but we are going to come through it.
“I thank you for standing by us, and we are going to stand by you.”
Rennie Marketing Systems senior vice-president Greg Zayadi, at home with his kids, said reality hit hard around March 11 or 12. At first, it was just an issue of how to work from home. But then the industry began wondering what it would do with its sales centres in the era of social distancing, he said.
“The first thing was figuring out what the policies are, figuring out what the protocols are, moving to appointment only so you could control the environment a bit more,” Mr. Zayadi says. “We were asking, ‘How many people are allowed in your sales centre? Who’s walking in the door? How could you qualify them, have they been travelling?’ All that. Honestly, that only lasted five days, then everyone went, ‘No, no. This is not good enough.’ And most people, ourselves included, by about [end of March], moved to sales centres being closed.”
Mr. Zayadi says there was no push back from their developer clients.
However, realtor Ian Watt says he’s dismayed at the realtors he’s seeing that continue to list properties.
Mr. Watt, holed up at his cabin with his family, said he is not taking any new listings and believes other realtors should do the same. He said only those realtors who are completing a deal should be working.
“There are 12 new listings downtown every day and I don’t know why. Maybe they are the ones having to sell because they run Airbnb. I don’t know what their motivation is, but it’s unfortunate that realtors are not taking this seriously,” Mr. Watt says. “This is not an essential service. If you can’t handle not being able to sell for one month, then you have bigger problems than this virus.
“The thing is, I have children, so I don’t want to go out and expose myself and come home to my kids, and make everybody in my household sick for $10,000 or whatever it is.
“And if I listed your home right now, 80- or 90-per cent of people are not going to come see it, and you are not going to get a good price anyway, so you might as well wait.”
Developer Michael Geller said he is also seeing a lot of daily listings for development sites and properties.
“Business has not stopped, especially since I suspect many developers and investors, like me, prefer to reduce their exposure to the equity markets. I think things are going to get worse, and I suspect I am not alone.”
Mr. Geller, who also works as a consultant, said one project he is working on is going to begin construction without the usual pre-sales launch.
“The principals will just put in more equity to arrange financing. I suspect others will do the same since it may not be feasible to launch a project for at least the next few months and possibly longer.”
Mr. Geller says that the market had been down for some time and COVID-19 isn’t the only reason for the approach.
But with public hearings put on hold, any projects requiring approvals from the city are now on the backburner. That’s another hurdle they face.
Realtor Mary Cleaver says she’s working a few hours a week, mostly on deals that are about to close. She’s devised a new marketing plan. For those that do need to sell, she and her team have started to show units on Facebook Live. Buyers can watch the unit being shown and direct-message questions to the realtor as she walks through the unit. If people are interested in viewing the property, they will need to show that they have their financing in place and sign a waiver guaranteeing they won’t touch anything and they are not showing symptoms of the virus.
The resale housing market was thriving right up until March 13 and there’s a belief among realtors that it could pick up again, Ms. Cleaver said.
“A lot of realtors think we’re home for three or four months and then we’ll get past this, and people will always need to buy. Our teams sold three homes last week. Two of them were in the process before March 13.
“There will be real estate trading, but volumes will vary,” she said. “We need to prepare for that and each deal will be harder to put together. Another listing just came out and there was a strong offer. The seller took it and the buyer lost their job the next day and now it’s gone. These are the things we have to get used to.”
Mr. Zayadi said despite the market slowdown, prices haven’t yet been impacted.
“This isn’t a financial crisis yet. The banks are still willing to lend money. We’re not seeing prices fall off a cliff or anything.”
March had seen a 46-per-cent jump in sales over the previous March. And even after the province declared a state of emergency on March 17, nearly 1,000 people purchased homes, according to the Real Estate Board of Greater Vancouver.
Adds Mr. Wong: “We will get through it. The thing about real estate is we have all done so well from [2009] to 2018. So, it’s [about] supporting the industry by keeping employment, and it will be lucrative again. It’s just short term. It could be six to nine months.
“It’s a short-term roller coaster.”
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