Metro Vancouver developers may have got ahead of themselves with the number of housing projects they are pushing into the pre-sale marketing phase, says a local market research firm.
MPC Intelligence Inc. counted 6,659 units put into the marketing phase between March 1 and July 1, which approaches numbers thrown onto the market during the headiest days of pre-sales in 2007. But the sales are not at 2007 levels.
“It’s a big jump,” Jeff Hancock, senior manager at MPC said in an interview.
Hancock compared the 6,659 units now in the marketing phase with just 1,937 in 2009 and 5,066 in 2008.
“I wouldn’t say [the 2010 number] is too many. I would say it will be interesting to see whether the market can absorb the number of units that have just come on [the market],” he said.
The more important question, however, is how quickly the units being put onto the market will sell, according to Tsur Somerville, director of the centre for urban economics and real estate in the Sauder School of Business at the University of B.C.
Somerville said marketing is a bit of a “lagging indicator” of market sentiment, since it takes a long time to plan a housing project, obtain approvals and bring it to the marketing phase.
“We should view this [report] as, to some extent, how people were viewing things at the end of 2009 and the first part of 2010,” Somerville said.
Metro Vancouver ended 2009 with sales in the resale market that were almost 45 per cent ahead of the dismal months at the end of 2008.
By mid-2010, however, the resale market for housing, the bellwether for overall market health, had cooled from the rebound experienced over the last half of 2009 and the start of 2010.
In the coming months, Somerville said, “I don’t think we’re going to have a lot of round-the-block lineups [for condo pre-sales].”
He said the wave of pre-sales flowing into the market also reflects the extent to which developers pared back their development plans during the market slowdown. Current projects represent developers’ attempts to catch up and capitalize on market sentiment, Somerville said.
Cameron McNeill, president of MAC Marketing Solutions, said earlier that while sales have slowed, the fall-off in sales this summer has been nothing like the collapse of sales during 2008.
McNeill said he is seeing some sales at the 15 or so projects he is marketing, but predicted fast sellouts will be a thing of the past.
“Traditionally, over the years, a project would normally take as long as it would take to complete construction for it to sell out,” he said. “That means 18 to 30 months. That is the pace we’re seeing now.”
However, Hancock said the number of units now in the marketing phase has the potential to put downward pressure on prices, depending on whether developers decide to proceed to construction.
“I think a lot of developers were just ready to go and decided to test the market,” Hancock said. “And if they don’t get the pre-sales they need, they’re okay with that and will just hold back.”