Cressey’s VP of Development, Jason Turcotte, has his finger on the pulse and a few predictions for the remainder of 2018. How’s the presale market? What’s impacting the market? What does the future of Vancouver Real Estate look like for homebuyers and investors alike? Jason joins Adam and Matt to answer all these questions and more!
Vancouver Real Estate News, Market Updates, Insider Tips, Stats, & Analysis
About Jason and Cressey:
Jason is VP of Development for Cressey Development Group. He leads 12 managers who are primarily responsible for product development, entitlements, and working with sales and marketing on each project.
Cressey Development Group was founded in 1969 and still remains a family-based business, though it has grown to over 300 employees. It is involved in all facets of real estate (condo and rental residential, and office development). Cressey operates in BC, Alberta, and Washington state.
On if the Chelsea project is indicative of the current presale market:
There is still incredible demand in the marketplace, but we’re seeing a slowdown. This means where the marketplace deems there to be good value offers, in terms of bang-for-buck, location, etc., demand is still there; it’s just not the same in activity and in how people would buy everything as it has been over the past few years.
Chelsea has a premium location on the Cambie corridor, and it’s reflective of the end-user which comes across in its furnished show home. Jason thinks it was his team’s most complete effort yet, in terms of thoughtful details. It’s a relatively spacious home. They’ve seen an excellent response: people think it’s a good value, of high quality, and in a great location. If you can hit all of these things, there’s still real demand.
On the presale market in general and the direction it’s heading:
We’re starting to see activity slow down within all the submarkets – existing condo, townhome, and presale – as they’re all connected. The presale market held out the longest in terms of robustness, and it continued in a frenzy of activity. It’s no surprise, particularly for this time of year, that some projects are pulling the plug (sometimes for different reasons than demand-side issues, as they’re mostly around cost and entitlement). Jason hasn’t heard of projects not achieving presale targets, though it could happen. Where there’s been launches and inventory remains, developers are getting a little more aggressive. This is a sign of a more balanced, normalized market—there’s nothing wrong with this.
On how a balanced market in Vancouver feels like we’re standing still, but it’s really business as usual:
Jason agrees. Don’t take snapshot statistics in too much isolation—it’s a fluid, ever-changing marketplace, even daily. Jason thinks September is really a pivotal month to indicate direction for the industry and market. Through the spring as we saw declining sales and days-on-market go back up, there was a return to normal. But now, with the dead of summer and August coming up which is traditionally slower, we may see listings fall off and get put back on the market in September.
On whether Jason would buy an investment property this August:
Jason often chuckles about why people wait to buy in the busy months—it’s counterintuitive. The best opportunity to have choice, time, and potential to negotiate a good deal is in a slower month. August is a great time to look for an investment property if you can make the time to find the right opportunity. Don’t plan for the short-term; plan for the medium-term with a minimum five-year horizon in a great location. The rental market will follow your taste.
On how demand staying relatively low for new construction and costs continuing to escalate would impact Vancouver’s need for supply and increased density:
We are amid a crazy cost environment in a slow marketplace. In the last market run, we’ve seen the introduction of “mega-projects”. Some are in Vancouver and Surrey. They have many hundreds of units, and Cressey is currently building one with over 800 units and 200,000 square feet of commercial and retail space. These projects require an incredibly robust market to generate the velocity of presales it generally takes to get a good financing deal and justify the risk, among other things. Projects in a prolonged, slower market are the hardest to make sense of and underwrite as a business decision but are also the biggest chunk of supply. This could mean a drastic reduction in new condo supply hitting the market, which would drive pricing up. So, although we may be going into an environment with lower demand, the supply should quickly follow suit and we won’t see a significant change in the value of real estate.
On if he sees many developers pulling back in the future, if present conditions continue:
Absolutely. Many developers will feel it’s not the right time to build a project. The marketplace has calmed down to some degree, but costs have not. One side continually rises and has seemingly not reached its peak yet, and the marketplace says they’re taking more time to make decisions. It’s not the best combination, especially for more commodity-type projects (i.e. perhaps you don’t have the right location, or the property is more run-of-the-mill), so many will take a wait-and-see-approach until costs come down. This means less supply to market which is an issue, as we need more.
Tom Davidoff has said that speculators are good for a real estate market because they lead to more supply.
On if current demand measures will have long-term negative effects on the health of Vancouver:
They will. Many well-paying, long-term jobs have been created because our housing market has been so active. Thinking about how hard it is for people to move here and find a place to rent, imagine how things would have been over the past ten years if we didn’t have the number of investment-oriented purchasers in the presale condominium projects who eventually became landlords. There was no other meaningful supply, so the rental market would be that much tougher now. Jason agrees with Tom; though speculators get a bad rap, they are providing rental housing supply – an important part of our market – and incredible job creation.
On if cities like Shanghai and Hong Kong are still good comparables for Vancouver, and if there’s a lot of room for Vancouver’s prices to increase dramatically over the long-term:
We have an amazing slice of the earth—this is undeniable and people understand why it’s so expensive. They know we have limited space. Vancouver is a unique city for North America, with its appeal and global recognition. Over the long-term, we could see continued strong interest and governments need to decide who we’re going to be—at least recently, we haven’t known what we want. Will we be a global city, marketing ourselves to the world, or not? This is a concerning message. Anyone accepting an investment opportunity, real estate or otherwise, should feel like they have a clear understanding of what we stand for as a city, province, and country and know that the rules will be honoured and not changed in the middle of an investment decision. It doesn’t feel like you can rely on information out there today because government keeps changing things halfway through—we need confidence returned to the stability of our marketplace.
A big part of the issue is affordability and homelessness, which leads to questions about addiction and treatment. The Downtown Eastside continues to be getting worse, not better. Housing is part of the solution, so the City’s planning department and developers have a responsibility to find a solution. As a city and community, we need to do better at addressing this.
On if Cressey is considering new markets, and those which Jason is excited about:
They’re active in Seattle, where they have done several mixed-use rental projects, and continue to seek more opportunities there and in other west coast cities. The west coast is the main region Cressey operates in and, as the US’ economy is performing better than Canada’s right now, they are discussing opportunities in the states. They did an American condo building about 15 years ago and managed to get through without litigation, which is rare—Jason has heard most condo projects end up in a lawsuit, so they avoid them. So far, mixed-use apartment rental buildings have worked well. There is no shortage of demand in rental housing—it’s been a great market for Cressey.
On what the balance of 2018 and the next couple of years looks like to Jason:
It will be more balanced. September will be a rebound from July and August. Prices will be strong; there won’t be the same levels as recent years, but sales numbers and listings will be strong. This will continue in a more balanced way throughout the year. The next couple of years will depend on what happens with the municipal election and how the BC coalition government works out. Things will really depend on politics.
To learn more about Cressey: