A person jogs past for sale signs in the Vancouver neighbourhood of Kitsilano, in an undated file photo.Isabella Falsetti/The Globe and Mail
The next couple of years will be painful for the Vancouver region’s real estate market, say industry experts. Foreign money and a historically low interest rate have vanished. Inventory has piled up; projects are being put on hold – even after construction has begun – and work is drying up.
Prior to this week’s election, real estate experts got to question Prime Minister Mark Carney firsthand about his housing policies when he was the guest of honour at an event held by condo marketer Bob Rennie, founder of Rennie Group.
Businessman Ross McCredie, chief executive officer of Sutton Group, one of B.C’s largest real estate franchisors and principal of McCredie Investments, was an attendee. He cautioned Mr. Carney that the Canadian economy was in trouble long before President Donald Trump took office in the U.S.
Mr. McCredie wants government to prioritize job creation, as well as incentivize new housing construction, particularly for home ownership.
“I don’t think we need the housing if we don’t have the jobs,” said Mr. McCredie. “It’s the same issue they’re having with the Broadway Corridor, and all this housing they want to build. Well, just drive around Vancouver right now … you see a lot of vacancy signs on apartment buildings. Rental rates are going down; vacancy rates are going up. People are leaving the province.”
He wants to see federal incentives integrated with provincial and municipal policies. Vancouver’s market downturn is different than Toronto’s, where a higher percentage of presale purchasers are defaulting on their purchases instead of completing. But both markets have seen an escalation in standing inventory of finished units. In the current downturn, Mr. McCredie expects that segments of the presale market will see foreign buyers walk away from their deposits rather than complete.
“For a long period of time, Vancouver focused just on rich people from foreign countries. And they didn’t put housing in for people like ourselves. So, I think I think it’s been a huge problem.”
The Liberals recently announced a housing plan to double the number of homes by adding 500,000 homes a year, putting up $25-billion in financing and $1-billion in funds for prefabricated (factory-built) housing. They also promised a tax incentive for investors of rental housing that hearkens back to the 1970s.
Mr. McCredie worked in the U.S. for several years and had the opportunity to market a project in Mexico for Mr. Trump but decided against it. After meeting Mr. Trump a couple of times, he believes that some of his dislike of Canada stems could be the public rejection of Trump-branded hotels in Vancouver and Toronto. But he said Mr. Trump’s antagonism shouldn’t be the new prime minister’s focus.
“We need leadership that’s got to think not just through this crisis, but it’s got to think about how we put our economy on a footing. We should strongly be building ties into other countries. We should strongly be attracting very talented, smart, hard-working people to Canada.”
Andy Yan, director of Simon Fraser University’s City Program and associate professor of urban studies, said the housing approaches by all federal parties this election were too broad rather than customized to suit the needs of diverse markets. Metro Vancouver’s housing crisis has its own unique challenges, the result of decades of lack of supply for local incomes, the inflow of foreign wealth, and financing dependent upon investors.
“The toxicity for Vancouver occurred over decades, where we hit upon low interest rates and easy credit mixed with foreign capital,” said Prof. Yan. “Canadians are all in a storm, but in vastly different boats. The governments at all levels can’t ride this storm this time by just adding more housing without calibrating it to who they are trying house, and where, while also figuring out ways to pay for it.”
He’s not alone in questioning the federal response to B.C.’s housing crisis. A recent Research Co. poll asked respondents how much they trusted the federal Liberal Party to deliver affordable housing in B.C., and only 35 per cent said they trusted the government to come through. The Conservatives didn’t do any better.
Part of the problem is that the current market downturn in Metro Vancouver is different from previous cycles, said Greg Zayadi, president of Rennie Group.
“We are never getting yesterday back, not as an industry and not as a city,” said Mr. Zayadi.
“We have to all be ready to pivot and shift. The landscape for developers, the landscape of companies that support them, from the Rennies of the world to the architects, to the trades and the suppliers. We are in complete self-preservation mode, because the scale of the market that we have all built as these businesses is way off right now. And it’s not coming back any time soon.”
Mr. Zayadi is seeing all stages of a stalled development industry. He’s seeing the developers who have permits but have decided to wait another year and “mothball the sales centre, stop the marketing.” And he’s seeing two or three developers who have already presold units who are giving back the deposits. He’s even seeing developers who’ve decided to stop and leave a hole in the ground for a few years.
“We all grew these companies through, you know, 2017, 2018, 2019 and then accelerated in 2021. And now the market is off massively. We’re about to get the presale numbers in, but I bet you it’s going to be the worst quarter we’ve seen in pre-sales in the history of our market,” said Mr. Zayadi.
He said unlike other cycles, the rebound isn’t happening as quickly, although he expects recovery by 2027. The resale market has been flat for two years and condo presales dropped 47 per cent from the first quarter of 2024, according to market researcher Zonda Urban.
“It’s going to take a long time for those two things to change, as we figure out how to bring supply that matches affordability that matches demand,” said Mr. Zayadi. “Because right now, in many ways, it’s not a matter of a supply imbalance. It’s supply to meet demand.”
Mr. Zayadi said there are about 4,700 newly built condo units in the Vancouver region that need to be sold. But that doesn’t mean that prices will come crashing down.
“It doesn’t mean they’re not selling because developers are willing to sell them at what can be a pretty decent price. I’m not calling it cheap. It’s still expensive, but there’s buyers out there for it. People have been able to resell their units, people have been able to rent out their units and the developers have been still selling units.
“If all of a sudden, we saw prices start to disastrously fall off, that would change the story. But we’re not seeing that yet, right? Like we haven’t seen a real fall off in pricing. Most of these people completing are not necessarily down a lot of money. Have they broken even, once you take into account taxes and commissions? Probably not. But they haven’t lost 15 per cent of their value.”
Unlike what’s happening in Toronto, where prices rose quickly and the towers were much bigger, Vancouver presale buyers who’ve lost money will do their best to mitigate the losses instead of defaulting, said Mr. Zayadi.
The average age of the Ontario first time home buyer is rising. Are you an Alberta resident in your late 30s or 40s who recently purchased your first home? We’re working on a story about home ownership and would love to hear from you, in particular if you are also a recent immigrant or newcomer. Email Globe editor Roma Luciw or journalist Zahra Khozema to share your experience.