I say GREED is a factor in the recent condominium slow down!

Recently I had a call from Frank O'Brien who writes for Western Investor and Business in Vancouver who asked why I thought there had been such a significant slowdown in the number of condominium projects getting underway around Vancouver and elsewhere in Metro. To my mind, the problem was complex, but two key reasons were unrealistic asking prices on the part of vendors, and the uncertainties associated with excessive Community Amenity Contributions (CAC's) being charged by Vancouver and other municipalities.  Here's Frank's story.

Greed" blamed as residential land sales plunge | Print |  Email Wednesday, 07 August 2013 18:32 inShare "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. This week RealNet, a Toronto-based data-tracking firm, reported that sales of land suitable for multi-family properties plunged 30 per cent in Metro Vancouver during the first half of this year, compared to the same period a year earlier. The trend is also seen in Toronto and Calgary, where sales of residential land dropped 51 per cent and 52 per cent, respectively. RealNet research manager Richard Vilner said the decline in multi-family land demand mirrors a slow down in condominium sales. "Land prices may have peaked in Canada's three biggest housing markets," he suggested. 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 high-rise projects with 3,670 units started marketing between January and June 2013 in Metro Vancouver. This is down 20 per cent compared to 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 to 34 projects with 2,400 units in 2012 - a 57 per cent drop. Geller aid many landowners and civic governments haven't yet got 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,"Geller said. 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," Geller 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. Any developer 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, notes a study by Altus Group. 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. "I am not surprised that land sales have slowed down," Geller said.