Presale Panic: A Look Inside the Vancouver Condo Market

Denny: They are. I think our version of it is quite minimal compared to Toronto, but we definitely have some pockets that are hit hard by this.

Jamie: Definitely. Yeah. And I think this episode is truly probably stirred by the news that we’ve been getting over the last few months in the Toronto condo market. And we do see it here, but the stories I’m hearing over there, it’s just like tenfold.

Over here, I think there are pockets in the valley that are more affected, but in our markets that we work in, it’s like Brentwood, North Road, you know, those are probably the most common. I mean, Burnaby did a pretty aggressive job at getting these high-density master community plans approved. And now they’re kind of a little bit stale and stagnant. There are not as many cranes in the air. There is construction happening for stuff that was already past that point of no return, but I think Burnaby is probably to me the standout victim of the current condo crisis, if you want to call it a victim.

Denny: What was the peak of presale madness? Because I remember the Pier West development in New West that launched early 2018 and that was complete madness.

Jamie: It was… they probably sold at $1,100-ish a foot. It launched at a time with complete madness when the resale market was not in complete madness, right? It was kind of after the condo boom in 2017, but they definitely had the, “we’ll tell you when to buy, you’re lucky if you can buy here” sort of window of time. I mean, boy, was that… I’m so glad we have that power back from developers. I mean, there was a moment in time where we waited out front, first come, first serve, and then it became this moment in time where you get a number and a lottery ticket and you’re lucky if you get to be a buyer in these places. And that’s how crazy it got. But yeah, Pier West was 2018 and it was a lineup around the block and I would say the peak of condo presales in my opinion was probably 2017.

Denny: Pier West… I mean, presales have had a lineup around the block for years prior to 2018. I remember multiple times lining up where presales started at noon or something like that and I’d get there at 6:00 a.m. Or there were at least two times I can remember that I paid a friend of mine to sleep in line overnight.

Jamie: Yeah. For a presale that launched the next day or whatever. Ravenwoods, Seymour Village.

Denny: Raven Woods was one. I think our clients are still appreciative of that. There was another one in PoCo that clients wanted a really specific unit in a townhouse complex that was launching the next day, and we had someone go there at 6:00 p.m. the night before and they were 10th in line. There were nine other people that got there before them. Wild.

Jamie: You know, a decade ago, the condo presale experience seemed to be like the old Wall Street trading experience that you’d see on TV where everyone’s waving around, “Hey, come here, sales rep. I want to buy a place.” But it was cutthroat. I can remember some launches in New West where you’re just begging to get a sales rep’s attention so you could mark down a unit and get one under contract. But it’s not there anymore. Pier West was a great example of that.

To me, that was like the peak madness. Maybe it was late 2017, early 2018, but Pier West launched, I think it was January or February 2018, and they had about 650 units in the two buildings, and they had 3,500 request forms. 3,500. So, it’s really just a lottery. And every developer at that time was dealing with these request forms differently, whether it’s like a relationship that you had with the sales manager, if you’ve done deals with the realtors that were involved or the sales team that was involved, you usually had a bit of a leg up. Some of them just did a straight lottery, others did like first come, first served. It was complete madness.

Denny: And when I first got into this business, presales were priced around the same as resale.

Jamie: And at this time, it felt like a 20-30% premium on top of resale.

Denny: I call it 20%, but when you account for GST, maybe a little more.

Jamie: But Pier West is a unique one because it’s a waterfront development that got a lot of attention. But that’s just one of many examples. There were countless ones where people would blindly buy just to get in line, just to speculate. There was a number of years with a track record of presale being a really good investment, that in two years from now you could assign the contract and make 10, 15, 20%. And there were multiple people in lots of projects that were just signing contracts for three or four or five units in a presale with the anticipation to rent them or to assign them, with no anticipation of completing on them whatsoever, and just trying to sell in a year or two from now, sell the contract, and try to make $100K per unit. And it was a pretty viable investment option for a period of time.

Denny: The draw for most of the presale buyers was that you buy something today that completes in three, four, five years. You don’t have to be a landlord and hopefully, the market appreciates by the time it completes.

Jamie: The unique thing… I think that’s unique to Vancouver’s market and probably other parts of the world as well, but I think we’ve definitely… per capita, it’s definitely a way that a lot of people have invested over here. There are a lot of people that I can think of that have bought a presale for investment. I’m sure when you go to other parts of North America or the world, it’s not even anything like what Vancouver is in terms of the presale investor market.

The funny thing about it is a lot of these presale investors had no intent on really being a landlord or didn’t really want to be a landlord per se. And I say that because a lot of the conversations I’d have with a presale buyer, whether it was 5 years ago or 10, is that the project’s selling at a premium price. It’s probably 20% above resale value. So, if you’re talking about what is a better investment, buying this presale that you’re going to put, yes, a 10% deposit down or maybe 20% in the peak of it, you still have to have an ability to close. So, even if you don’t have a mortgage today or tomorrow, you still have to have the ability to close when it completes. So you’re still committed to this, like you’re a landlord without just having to be a landlord.

Whereas, if you buy a resale, you’re paying 20% less, you’re going to get the market appreciation, but you’re going to be a landlord tomorrow. And that “being a landlord tomorrow” just turned off a lot of people. But oftentimes that was the obvious better choice. If it’s strictly an investment, don’t pay the 20% premium for new. Buy the luxury existing one for 20% less.

Denny: But not everyone wants to be a landlord right away, Jamie.

Jamie: And that’s the game of Vancouver. And a 20% premium doesn’t feel that way when everyone’s lined up around the block and one out of 10 people get it. Is that really a premium?

Denny: So, I think the point of this podcast is just to kind of update our listeners on what is happening in the condo world in greater Vancouver, give some specific examples, and show maybe some pretty negative examples right now that are happening with new construction that has completed recently, where units are selling for quite a bit less than what they were originally purchased for.

Jamie: But let’s start with a positive. I mean, it’s not necessarily a positive for Greater Vancouver consumers, but it’s a positive for a client of ours. But this was the peak of the madness, 2016. I remember this is a client of ours that bought a unit, was planning to move into it, life changed, and they assigned it. They bought a presale in 2016 at Amazing Brentwood. They paid $929,000. It was an awesome 3-bedroom unit, really good layout, 1,400 square feet, I think, that was on the 57th floor, great views. They paid $929,000. Twelve months later, in 2017, they assigned for $1.45 million. So, they made $500,000 in a 12-month period without any monthly costs, no mortgage, no property tax, just from signing a contract and selling that contract.

That was to me the craziest lift that I saw in the presale environment. We had others that would assign units and make $100k or something like that, but that was the peak of the madness for me that I saw personally in a personal story. I’m sure there were others that were in similar ballparks at that time, but that was the peak of the madness with this crazy assignment world that this client made a 50% return on the contract price, but from their deposits, which were probably about $200k, they made what, 250% on that. It’s incredible.

Denny: Great investment. Crazy. And didn’t they rent after that, too? They were happy renters.

Jamie: So, to encompass it, Denny’s talking about assignment for profit. There was a window of time… I think because of those success stories, developers sort of changed their assignment policies over the years after that. Maybe before we get into what’s selling, what’s happening, some specific examples of different developments and what they’re doing now, let’s just talk about buying new condos.

So, when you’re buying a new presale condo, the headline today is that condos are not selling. The condo market as a whole is down for new developments, so new developments aren’t starting. Existing ones where buyers bought into are completing soon, and a lot of the buyers that bought into those ones years ago that are closing soon, the values of those condos aren’t what they paid. And the buyers, in some cases, aren’t qualified to get a mortgage for their purchase. And so they’re trapped in a position where they bought an investment condo, it’s worth less than what they paid, and they can’t walk away from the deposit without the risk of being sued. So a developer has your deposit and they can also go after you for damages in addition to the deposit if there are damages incurred. That’s the threat that prevents the developer from letting the buyer off the hook.

And then the opportunity for the buyers that are in trouble to try to get rid of this investment decision they made years ago is to assign it to another purchaser. But when you assign a contract to purchase a condo, it’s not that plain and simple. Oftentimes developers have to approve it. It may be restricted altogether. And I’m finding more resistance to it than encouragement from developers. I think it’s more often than not the developer’s not going to allow it.

Denny: It’s more often than not developers have existing inventory they want to sell through, and even if they do allow an assignment sale, they will take a cut in most cases. But the assignment terms have evolved over the last say decade or two. It used to be you could freely assign a contract to purchase and sale and the developer would accommodate it. And then, people were doing that for a profit, so developers put in 1, 2, 3% of assignment fees, or sometimes restricted it altogether, or said that it can only be assigned to an immediate family member. And they did these things to prevent competition from them selling… I mean, ultimately just to prevent their own competition. And if they have a 1,000-unit project and they sell out 800 of them but they have 200 remaining, and a portion of those 800 units they sold out try to resell before it closes, they’re creating their own competition for the remaining 200 units they have to sell.

Jamie: So, if you’re buying a presale condo with the intent to assign it before it closes, just don’t. Or make sure your assignment terms in that contract are as open as possible. Make sure there are no restrictions on assignment that you… I mean, you still require the developer to sign off on it and approve it, but rarely are you signing a contract that outlines that as perfectly assignable no matter what. So, assignment risk. If you buy a presale, whether it closes in 3, 4, or 5 years, plan to close. Plan to close.

Denny: Are there opportunities in assignments today? I would say there probably are. They are likely hard to find, but they’re out there.

Jamie: They’re hard to find because the two most popular terms in those assignment terms now in presale contracts are one, you can’t assign until the development is 100% sold out, and two, you can’t market the assignment. They won’t let you put it on MLS. There are some developer contracts that say you can’t even market through social media. Basically, our only option as a realtor taking an assignment listing is to email individual realtors and say this is what I have, one-on-one communication. Just fishing for, “Hey, I have this,” which makes them really challenging.

Denny: And yes, there are some opportunities. We get emails fairly regularly from other realtors in Greater Vancouver who have assignments, but they still are in most cases above resale value, above resale prices currently. A lot of those contract prices are 10, 15, 20% above what a resale unit would sell for today, and they’re taking off, you know, 10%, so they’re still slightly above the resale value. The challenge for an investor looking at an assignment, which was pretty regular five years ago, is you’re probably paying a slight premium compared to resale. You then are agreeing to pay GST when the purchase closes, and then you’re probably still, at the completion of that, still above resale value.

Jamie: I think the question is… so if presales are selling at $1,300 a foot plus GST and in the resale market they’re selling for $1,100 a foot, that $200-a-foot difference is a pretty common gap that we’re seeing right now. I think a typical assignment opportunity right now would be, would a buyer purchase this and take over the original buyer’s deposit? Is that a deal? The deposit might be 10%, 15%, or 20%. But I don’t know anyone that’s assigned a contract of sale and then paid the purchaser to take the contract off their hands.

Denny: Usually the conversation is, in a market like this, how much of the deposit do I get to keep? Do I keep any of it? Do I keep half of it? And in a lot of cases, if the seller of this assignment keeps zero of the deposit, it’s still above market value or not necessarily a good deal.

Jamie: But it’s case by case. Ultimately, the challenge is it’s hard to sell assignments when you can’t market them. It’s even harder to sell assignments when they are $200 a foot more than the resale market and your deposit doesn’t really… even if you forfeit your deposit, it’s not a good deal.

Denny: I think that’s a pretty good summary. And because assignments are kind of few and far between, my examples are going to be resale. So, complexes that have completed fairly recently and then a lot of units come up in those complexes pretty regularly in new construction, and what those units are selling for compared to their original contract prices.

So one specific one I looked at: Brentwood has a ton of new condos and one of the new developments there is Concord Brentwood. There were two buildings that completed in 2024 there. Currently, there are 77 listings in the four towers there now at Concord Brentwood. So, there are 77 listings, 32 of which are one-bedrooms. In the newest phase, their most recent one-bedroom sale sold for $100,000 less than the original contract price. That is not taking into consideration GST and property transfer tax, so that and real estate commission… so that person right there is probably losing 160k. The last two-bedroom sale in Concord Brentwood, which was in March, sold for $145,000 less than the original contract price. That’s again not taking into consideration GST, property transfer tax, and real estate commission on the sale. Oh, man.

Jamie: Do you know roughly what price point you’re talking about there? Is that a one-bed, two-bed, a million, $600k?

Denny: So, the last one-bedroom sold in the high fives. That was $100,000 less than the original contract price. And the last two-bedroom sold at $793,000, I think it was, and that was $145,000 less than the original contract price. The original contract price was like $942,000 or something. But after GST, closing costs, commission, well over $200k.

Jamie: Call it $200k. Big hit. That one-bedroom was on the ninth floor and sold for $1,056 a square foot, where the new contract price, whatever it was 5 years ago when they presold that one, was like over $1,200.

Denny: So I had a client buy in Concord Brentwood and they bought it in 2019 in presale and it worked out to $1,274 a square foot.

Jamie: There you go. And that’s for a one… that’s basically a $700,000, 570-square-foot one-bedroom. So that $1,274 a foot was a price agreed to in a contract 6 years ago in 2019, and we’re probably trading at… well, you said $1,050 in that one example. That might not have had a parking stall.

Denny: That was the ninth-floor unit, so low in the building, and that sold for $1,056 a foot. I think your client’s was quite a bit higher.

Jamie: Yeah, 21st floor. So that probably would be more like $1,125 a foot right now. All in all, GST considered, give or take, $200 a foot down. I mean the range is $150 to $250 maybe, but there’s a bit of a gap. So that’s Brentwood.

Denny: Yeah. Gilmore Place, they still have units for sale in their new phases. There’s a junior two-bedroom that is listed right now presale-wise on the 50th floor for $1,439 a foot. Those are reselling at just less than $1,200 a foot in the ones that have completed. Gilmore Place one-bedroom just sold for $1,000 a foot and they’re advertising the presale at $1,439 a foot. Big gap.

Jamie: That’s a huge gap. So, we’re going to see extreme gaps of $400 a foot difference, but I think a blended gap is $200 a foot. That’s just a nice round number. And just to put that in perspective, say today our mortgage payments are about $500 a month per $100,000 of mortgage. If rates go down 1%, people on a variable rate are going to get, give or take, a savings of $60 a month per $100,000 of mortgage. And if your mortgage is $500,000, that’s $300 a month of savings. So, do you think that that $300 a month savings on people’s payments is going to make up the $200 a foot that we need to gain? Because $200 a foot on a $600,000 place is an extra $120,000.

Denny: No, even a savings of 1% is not going to cover the difference that’s needed to get back to $1,300 a foot sale prices. And I remember at Amazing Brentwood, their newest phase, which I think completes in 2027… in 2021, when they launched the presale for it, I put my name in just to see what happens. And they called me and it was $1,420 a foot. And I laughed and I was like, “You what?” I thought it was going to be like $1,200 bucks a foot. It’s $1,420. And I said no, obviously. Today, Amazing Brentwood, their resale stuff is selling for about $1,050 to $1,150 a foot. So when that completes in a year and a half, if markets don’t change at all, there’s going to be a lot of people in there that have presale contracts that are $250 bucks a foot over what resale is.

Jamie: Yeah. And Brentwood’s a really good example just because there are so many new towers that launched in this crazy presale environment that we were talking about in 2017, ‘18, ‘19, ‘20. There are a lot of these examples right now and a lot of people are in a lot of pain, taking big losses on this kind of stuff right now.

Denny: Fun fact, my first presale purchase, first real estate purchase ever, was Brentwood. It was Tandem in 2006-ish, I think. Maybe it was 2002 or three. One-bedroom for $196,900 and I think it was like 5% or 10% down. So times have changed a little bit.

Jamie: With now presales at Gilmore Place, for example, a one-bedroom would start around $700k. If it’s $600k, you don’t get a parking stall.

Denny: Do you want to pivot to another area?

Jamie: That’s basically it for Brentwood. There’s a pretty similar story in Port Moody. Port Moody hasn’t had a ton of presale projects, but there are a couple launched right now that are struggling to sell. There’s one specifically on Clark that is about 30% sold. They’ve been marketing for 3 or 4 months. The Inlet District, which is Coronation Park, has launched a couple of towers and they’re selling for about $1,200 bucks a foot where, again, resale for new construction that has completed in the last year is about $1,000. So that’s another 20% increase in that presale speculation.

Denny: Mind if I highlight a neighborhood here?

Jamie: Yeah.

Denny: Okay. I’m going to go with Coquitlam North Road, which is also Burnaby as well, in Burnaby East or Coquitlam West. That North Road corridor, it’s a whole new area. It’s kind of reshaping the Burquitlam to Lougheed Mall area and is loaded with new development. In the last 60 days, there have been 36 sales for newer condos built in the last 3 years and 156 listings. So there is stuff moving, but it kind of validates the price per foot that we’re talking about. In the last 60 days, the median sale price per foot has been about $1,100, and the median sale price is $695,000. So, you’re getting a small two-bedroom at that price or maybe a high-end one-bedroom. That’s $1,100 a foot for concrete towers.

I had a client buy into a concrete presale for $1,297 a foot for a very small junior one-bedroom. So, just keep in mind smaller units trade at a slightly higher price per foot than larger units. So, a 491-square-foot unit should trade at a higher price per foot than, say, a 1,000-square-foot unit. But yeah, $1,300 presale for a 491-square-foot junior one-bedroom versus $1,100 in the resale market out of the 36 sales that happened in the last 60 days.

North Road is a similar story to Brentwood, but I have a bit of a Brentwood bias. I think North Road is a gem if your life is in the Tri-Cities and you want to be a little closer to Port Moody activities. But Brentwood has just been under development for a little longer. It’s so central. It seems to get most of the attention when we’re talking about Burnaby. We’re not getting as many buyers considering North Road as Brentwood, and it’s really just because Brentwood is like the center of the city, probably the most convenient place to live.

Jamie: We’ve both lived there.

Denny: We have. I’ll go into New West. New West has really three developments that are basically encompassing the new condo market right now. One is 618 Carnarvon, the other’s Ovation, and the big one is Pier West on the water by Bosa. So Pier West, there are a lot of resale units there right now. I think the big message that I’m seeing, the takeaway I’m getting from the Pier West resale units, is that most sellers… Pier West sold in presale in 2018 and the prices that people paid there before GST are around what they’re selling for today. So, someone bought a two-bedroom facing the water for $1.2 million plus GST in 2018; today it’s selling for around $1.2 million all in.

It’s wild to think that that is one of the best scenarios that we’re seeing throughout Greater Vancouver is Pier West, which was craziness in 2018, but they’re getting approximately what they paid for their contract in 2018. One big takeaway though from looking at the resale values is lower units. So the developer, when you’re buying into a new development, there’s always a lift that goes up every floor that you buy. Developers charge more every floor higher. And it’s a great way for developers to maximize the sell-out value of a place because the people that are more price-conscious buy the lower units, and then people see sold stickers and then they start buying whatever is available on the higher end.

The prices that are trading in the resale market… if, because of that lift being, call it, five maybe $10,000 a floor when it’s being sold as a new development, and people see that as normal, it seems normal in a frenzy. But when you’re in real life and you see the finished product, it doesn’t really justify it. Particularly with Bosa’s Pier West, if you’re on the 10th floor or the 30th floor, you still are facing a wall of water in front of you. You arguably get more water lower down because it’s more in your sightline than higher up. And for me, the views on the 20th floor are just as good as the views on the 40th floor. It’s just how much of the base of Mount Baker do you want to see?

So, in the resale market, I don’t think there’s much of a premium for going much higher. But when you look at what a unit on the 17th floor sold for compared to a unit on the 40th floor, the swing in price is about $150,000. So the same floor plan, call it 25 stories higher, might be $125,000 to $150,000 higher, but when you go there in the resale market, it might only feel like a $40,000 or $50,000 premium.

So, I think when you’re thinking long-term… not in every case, every building needs to be analyzed on its own… but I think as a general rule of thumb, consider buying lower on a tower. Don’t pay the developer’s premium per floor because it doesn’t really reflect the resale premium per floor. I think if a developer is trying to get $5,000 more a floor, $10,000 more a floor, the resale market might be two or three thousand. In some cases, it might be more. I mean, I know Coal Harbour might go up $100 grand a floor if you’re on the water there, but in suburb land, the condo sellers at Pier West that are selling a unit on the 10th floor are probably taking less of a hit than the people that bought higher up.

Denny: One observation there: price per square foot is less than $1,000 a foot in a lot of cases.

Jamie: So just price per… these are higher, bigger units facing the water, $1,030 a foot. The three-bedrooms facing the back track around $800 a foot. Concrete construction, new. Developers can’t replace that at those prices.

Denny: No, absolutely not. Concord Brentwood for reference: 13 sales in the last 30 days, 77 listings. So, the sales volume, the sales ratio is not terrible, being at like 17-18%. It’s just the ones that are selling are taking a pretty big hit from their contract price a few years back.

Jamie: Would you invest in a presale today?

Denny: Probably not. My answer is the exact same.

Jamie: Not just… well, mind you, I have a bias of liking land and houses. But I also think that presale prices today are probably going to be the same next year, and I’d rather do it next year than this year. So, it’s not that I wouldn’t do it period, it’s just that there’s no sign of it taking off right now, so I would just rather wait.

Denny: But that being said, certain areas aren’t abundant in presales. So like Port Moody, like Pier West, for example, in New West, that was an example of a waterfront building. If you’re buying something that’s rare, that’s whether it’s waterfront or a boutique East Van building in a place you want to be or somewhere in North Van, if it’s rare and not readily available, sure. But if it’s like a commodity like Amazing Brentwood, I don’t know. I think I’d wait.

Jamie: Agree. Closing thoughts. $200 bucks a foot difference. No, I think closing thoughts… I think there’s opportunity for buying newer condos today. And I think if you’re buying in the resale market, the price you’re paying is below the replacement value. So, in theory, that to me is a deal. And if you’re lucky to find… I think there are opportunities out there that might be hard to find, but in the assignment space, not necessarily saying it’s better than resale, but there could be some opportunities out there. So, don’t shy away, but don’t line up around the block for that presale, but don’t shy away from looking at new condos, especially if you can qualify for a new one right now.

Denny: Yeah. I think that’s a good takeaway. There’s a lot of opportunity in new construction that has completed already, like the Concord Brentwood that’s a year old. You’re getting a one-bedroom for just over a thousand bucks a foot, $1,050 a foot versus two blocks down, the presale at Gilmore Place is like $1,300-$1,400 a foot.

Jamie: Yeah, that’s it. The world in presales is ever-changing and right now it’s not as sexy as it used to be. I don’t know how we’re going to feel about presale condos at the end of this year, but I imagine it’s got to be better than right now. Not that much, but it’s got to… I think we’re in the bottom of it right now. I think this is the bottom of the condo crisis stories, but I think there are also some people feeling pain and there are going to be more closings coming up where people feel pain. I think it’s going to be a slow couple of years ahead where there are going to be fewer starts. So, there could be a void in new condos for a period of time.

Denny: A lot of these stories are pretty bleak. Like what we mentioned, the two-bedroom purchaser at Concord Brentwood that sold for $145k less than their contract plus taxes and fees. They’re probably down $225,000. But for some reason, they’re not getting the headlines nationally. And I think it’s just because in Toronto those numbers look a lot worse and a lot of people are either walking away from deposits there because the numbers are so different or they’re selling for $400 or $500 a foot less. There were a lot of those presale developments in Toronto at the peak that were selling for $1,600-$1,700 a foot that are now worth $1,100. And so our $150, $200 a foot reduction in prices over the last few years doesn’t look as negative as Toronto does for sure.

Jamie: No, I don’t think so. And I think for markets outside of Burnaby, say East Van, North Van, a lot of markets aren’t flooded with new developments. So, you know, if you get a good opportunity for a new condo, it might be the best deal you’re going to see for the next few years.

Denny: Yeah. And we hope you got some takeaways from the new condo market crisis, if we call it a crisis in Vancouver.

Jamie: Thanks for listening. Thanks for tuning in. Thanks for sticking with us this long.