The weather is heating up, the market is cooling down, and we are back with another candid market update from one of the leading voices in new construction sales! Craig Anderson, VP of Sales at Magnum Projects, sits down with Matt & Adam live in Kokomo Studios to chart the evolution of pre-construction sales in BC, the evolving demands of buyers, and why box-ticking product will continue to sell even in the softest markets. How’s the market? Where are the best buying opportunities? And where does the Vancouver real estate market go from here? Learn from the guy who advises the developers and level up!
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Who is Craig Anderson?
I’ve been in the business for 20 years and with Magnum Projects for eight years. I’ve done a lot of work in Calgary and Victoria too, and other places around the world, primarily in presale.
Back in 2003, the market was starting to heat up, particularly in presale. I had always been interested in real estate and had a sales background. The popularity of a radio contest giving away a unit at 501 on Pacific drove the interest in presales. It got me wondering, “What is this?”
I worked with Vince on a conversion project down in Seattle. From there, my career grew. When I went to Calgary, it took a year to understand the market and another year to learn who the players are. So if you don’t have two years, you need to buy the talent. Most of the guys we ended up working with in Calgary were Vancouver developers.
Calgary is an interesting market. They love their neighbourhoods, even if they’re only a block long.
How has the presale real estate market changed over the last 20 years?
In a fast market like Vancouver, things move quickly and you need a lot of touchpoints. We probably convert 10-12% of registrants so we need to work harder to answer questions and be more available.
We don’t want people falling through the cracks. We have to remember who the buyers are and that they are buying homes, not just units.
What has Vancouver’s role been in advancing the presale market? Is Vancouver a frontrunner in the presale market?
Absolutely! I’ve worked in other presale markets and Vancouver is at least five years ahead of everyone else in things like product design, amenities, lifestyle, etc. All of the strategic thought is there. Anyone can draw floor plans, but it’s something else to understand your buyer. Vancouver is second to none.
The push of development in the 1980’s and 90’s in Vancouver meant we were catering to buyers all over the world. Those buyers were looking for very specific things. Every time you finished a building, you learned new things to better your next building.
Real estate is a sport in Vancouver. Realtors here are more intune with presale, even more than they were five years ago.
What is Magnum Projects?
Magnum Projects was started 29 years ago and has been instrumental in this marketplace. We want to do exceptional work and George, one of our founders, is very involved. He wants to attend all of the meetings. That sets the tone for the rest of our teams.
We’ve done 25 projects on the west side and have grown into Victoria. We work with both smaller developers doing smart work and the big name developers. We can cover all the bases within our group of 30 office staff and 60 sales staff.
Has the buyer profile changed on the west side?
The buyer profile on the west side has stayed very much the same. We try to target the west side downsizer but they’re very specific about what they buy. There’s just not a lot of supply on the west side.
Downsizers are only 5-10% of our buyers. They sell a house on the west side but they still want to stay in their community.
We also have 28-35 year olds, both singles and couples, who come in from Richmond, Vancouver or Burnaby. They usually have a connection to the west side, such as growing up there or having family there.
Next, we have 32-40 year olds who move into the west side with their families for school catchments.
What is the presale townhouse market like? What are buyers looking for?
People are looking for things like storage and lighting, especially in townhomes where those things are hard to come by. They like a door to the street, parking access, a rooftop patio, etc. We take note of what clients like and bring that into the next project. The more boxes we can check, the better.
Buyers want to know, “Will this home fit my family?” And if you can answer that affirmatively, the market will accept it. Buyers also want to know that a location is going to work for them as a long term investment.
How are buyers approaching presale projects in 2022?
Investors love presale towers because it’s a five year build and you have time to watch the market move. That’s great when the market is so uncertain, like it is now. So it’s a great buy if you can find one, but there are fewer and fewer towers available.
With townhomes, it’s closer to a two-year build. Buyers want to know about completion; it’s the first question they ask. They need to know if they can hold out in their current situation for two years.
The next thing buyers ask about is interest rates. People are asking if they can put more down in order to offset the interest rate. End-users are doing this sort of mental math to figure out what will work for them.
Are townhouses the new single family home? Do townhouses serve the missing middle?
The most affordable single family home in Douglas Park is $2.749 million, 1900 square feet, three bedrooms with one bath, and needs a lot of work. You can’t get into a west side house for less than $3 million. So if you can’t afford that, your choice is condos or townhouses.
The townhouse buyer is very specific. They want more square footage and are willing to pay for it. We didn’t think we could break $2 million for a west side townhouse but that’s the new goal number. People are living in them like a single-family home.
A bigger townhouse will go for $13.60-13.80 per square foot. It’s a substantial price tag, but you’re paying for the location. A lot of our newer registrants are from Yaletown. They want more space and to get out of a noisy downtown neighbourhood.
We’re seeing families move back into the west side. People who maybe grew up in the area but had to move to condos are now able to move back with their own families. We’ve seen this on the North Shore too.
How do residents in townhouses and condos build community?
Having a door to the street is a big factor in townhouse living. It’s very different to drive or walk by your neighbours’ homes rather than just see the back of their heads on the elevator.
We like to incorporate something we call “the place to collide” in our projects. Areas like gyms or amenity rooms are where you can meet your neighbours with like-minded interests.
At one of our projects, we set up a bunch of banquet tables and did a garage sale, so you could get to know your neighbours. It’s a shame to live with 175 other families and only know a couple of them.
What is the price gap between single family homes, townhouses and condos? How does that price gap affect buying decisions?
When the gaps between subclasses are too close, you’re telling people to do nothing. If you have townhouses that are going for $2.5 million on the west side, that’s too close to a single family home going for $3 million. So people will either pay a bit more for an older single family home that needs renovation or they will head east.
If single family homes are $2.8 million, townhouses need to be $1.8-2.2 million and condos will be below that. Then there’s submarket pricing based on location, number of bedrooms, etc.
You have to look at what is competing with you. It’s not just the other subclasses but your own subclass in another location. When we’re working on product design, we talk about who the buyer is. We have to know what size home this buyer is looking for and design for them.
Townhomes and single family homes are sold by their end price. People might check the price per square foot, but it really comes down to the end price fitting into their budget. Condos are more of a commodity sale.
What do you like about presale product sales?
I like imagining who the buyer is and testing the product along the way against that buyer profile. I love working with interesting teams. It’s a neat feeling to drive by projects and know you had a hand in them.
Do you ever get it wrong when predicting who the buyer will be?
Yes. Sometimes you drink your own Kool Aid too much and by the time you figure it out, you’re down to limited strategies. Sometimes markets change on you too. It most often happens to us when a project is dropped on our lap. It’s hard to sell things if the buyer hasn’t been thought about from the beginning of the design process.
How is the Vancouver presale market right now?
Properties that have it all are still moving. We’re coming out of a market where everything was getting absorbed, but that’s changing. So now incentives are coming into play.
For buyers out there, now is the time to be very sharp. It’s hard for projects to come down in price because of rising construction costs and the high cost of land. The price is going to be the price. But with projects that are getting close to closing, there are some screaming deals. You can negotiate some strong deals for yourself in certain areas.
When covid started, nothing came out. So there’s nothing to buy that’s getting close to finishing. The stuff that sold in the last year has been absorbed. If there’s a project that’s 60-80% sold, those developers want to start repatriating that cash. You need to look everywhere, including New Westminster and Port Coquitlam. People are chasing dollars.
Why is New Westminster a good real estate market?
New West is a market I’m excited about. I am a bit biased, because I used to live there. But New West has a community. There’s been an influx of young buyers and a lot of new projects coming up. It’s a forgotten gem.
New West has never had sustained development. It will have pockets of development and then go quiet. I’d love to do a townhouse project in New West. That would be a home run.
New West is 10-12% undervalued all of the time. It’s an exceptional neighbourhood.
There’s really good value around Queen’s Park. You can find a low market house for $1.3 million. There’s also an undeveloped area by 22nd Street skytrain station. It’s going to explode – it’s just a matter of time.
What other real estate markets in the Lower Mainland are you excited about?
Port Moody is another area that’s always on my radar. That’s more about condos for families. Of course, I love the west side in Vancouver. Olympic Village is another area of interest, though there’s not much left there to do.
I’m starting to look at smaller towns, like Port Coquitlam, down in the city centre. People want to get into that marketplace. The value there will be exceptional.
What areas outside of the Lower Mainland are you excited about?
Victoria is tops for me. It has changed completely. Victoria has a draw across Canada and it’s not just for the older generation. People who are going to school there are staying after graduation. There’s a great climate and a great community.
Kelowna is another area of interest. It’s an easy drive from Vancouver and the waterfront they’re developing up there is going to make it a world class destination.
What is the future of Vancouver real estate?
People want to live in Vancouver but there are not a lot of options. We haven’t had a lot of development in the last couple of years. We’re in a market that trades within itself. Unless you need to sell, you don’t.
We’re hemmed in by mountains and everyone wants to live here. That’s why we don’t see that dropoff in pricing.
I’m always going to be bullish on Vancouver. Even if things slow down, really well thought out product will continue to sell and there won’t be much of it.