“Greed” at all levels from the street to city hall is to blame for a sharp drop in sales of residential land in Metro Vancouver, says real estate consultant and developer Michael Geller.
“We all got too greedy,” said the president of the Vancouver-based Geller Group.
RealNet, a Toronto-based data-tracking firm, recently reported that sales of land suitable for multi-family properties plunged 30% in Metro Vancouver during the first half of this year compared with the same period a year earlier. The trend is also seen in Toronto and Calgary, where sales of residential land dropped 51% and 52%, respectively.
RealNet research manager Richard Vilner said the decline in multi-family land demand mirrors a slowdown in condominium sales.
“Land prices may have peaked in Canada’s three biggest housing markets.”
Metro Vancouver condo developers are pulling back from launching new product, according to MPC Intelligence, because of an overhang of unsold inventory.
MPC says 19 highrise projects with 3,670 units started marketing between January and June 2013 in Metro Vancouver. This is down 20% compared with the same period in 2012 when developers started marketing 26 projects with a total of 4,600 units. The decline in low-rise marketing starts is even more dramatic: 18 projects with 1,020 units in the first half of 2013 compared with 34 projects with 2,400 units in 2012 – a 57% drop. Geller said many landowners and civic governments have yet to get the message that the residential market has changed.
“[Land owners] in Vancouver are asking $180 to more than $200 per buildable foot [the amount of square feet of residential space that can be built] for rather poor quality sites.”
At the same, municipalities, including the City of Vancouver, continue to demand community amenities and development charges from residential developers.
“These can add up to $50,000 per unit,” he said.
In Vancouver, one recent land assembly is made up of six detached houses in the Fairview Slopes area, where, based on current zoning, the list price is $200 per square foot for a low-rise multi-family project. According to an Altus Group study, developers would then have to add in construction costs of approximately $220 per square foot, plus civic fees, marketing and other soft costs, such as landscaping.
Yet the average per-square-foot price of a new low-rise condominium in Vancouver is around $500 per square foot, meaning potentially tight margins for speculative developers. •
