Regulate condo presales, Vancouver mayor tells province
"We’ve heard an ongoing concern about projects not being readily available to local buyers"
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Vancouver’s mayor wants the province to explore new regulations to reign in the speculative presale condo market.
“We’ve heard an ongoing concern about projects from many different developers not being readily available to local buyers and we’ll be flagging that for sure,” Gregor Robertson told Metro.
“Many developers market their product overseas as well as locally. There’s certainly some questions about real estate regulations and how much insider trading happens within buildings that don’t come available to the general public.”
In May 2016, the former B.C. Liberal government introduced new regulations targeting a form of property flipping using property assignment contracts, which enabled buyers to avoid paying the province’s property transfer tax. The new regulations effectively ended the practice by requiring all profits made on assignment flipping to revert to the original seller.
But the regulations did not apply to presale condo assignments, in which buyers purchase a contract to buy the end unit at between five to 10 per cent of the purchase price. B.C.’s 15 per cent foreign buyer tax on Metro Vancouver properties also does not apply before the condo completes.
Some real estate industry insiders say presale flipping and the common practice of developers selling presales first to “friends and family” — what Robertson described as “insider trading” — needs to be examined and better regulated.
While the introduction of the 15 per cent foreign buyers tax caused a slowing in the detached home market, condo sales have filled the void. The benchmark price of a Lower Mainland condo rose 20.7 per cent year over year in July, compared to a 4.6 per cent increase for detached homes.
Prominent Vancouver developer Westbank recently came under fire for appearing to reserve some presale units for its Joyce project at overseas sales events in Hong Kong and Singapore, according to a Singapore real estate publication called The Edge Markets.
While Westbank is known for its high-end downtown buildings that are heavily sold overseas, the project in question was a condo building in Vancouver’s working-class Joyce-Collingwood neighbourhood. To local press, Westbank had described the project as family-friendly building that would fit with the neighbourhood.
Jill Killeen, a spokesperson for Westbank, told Metro on June 21 that the article describing the Hong Kong and Singapore sales events was incorrect. Michael Braun, a Westbank executive, said that presales had been sold first in the Lower Mainland, and that all sales to date were to buyers to live in the Vancouver area.
But a July 24 story that appeared in The Edge Markets quoted Luke Fahon, managing director of Westbank’s Hong Kong markets, who said that 35 per cent of presales buyers for Joyce “are from overseas.” The Joyce project was marketed at an event in Hong Kong and another in Singapore, according to the article.
Westbank did not respond to Metro’s request for comment, but in his June 21 interview, Braun explained that many “overseas” buyers actually live in Vancouver and are simply buying presales from overseas locations.
“With almost 50 per cent of Vancouverites being Asian, you have a lot of people going back and forth,” Braun said.
Selling presales overseas is not a common practice among Vancouver developers, said Anne McMullin, president and CEO of the Urban Development Institute. Concord Pacific, Westbank and Holborn are three that sell overseas. Concord Pacific used virtual reality headsets to market their new Brentwood project in foreign markets.
Vancouver city council recently approved Westbank’s 57-storey tower for Burrard and Nelson, a proposal that included an elegant 331-unit condo building designed by Bing Thom Architects, as well as 20 units of market rental and 41 social housing units.
Robertson said council didn’t make a specific ask to Westbank to sell that project to Vancouver residents, but “we expect generally that developers will market their product locally.”
West Vancouver council did ask Westbank to sell to locals first for a project in Horseshoe Bay, after seeing condos marketed overseas before the project had even received council approval. But Coun. Mary Ann Booth said the agreement was not legally binding and presales assignments for that project have now soared around $1,800 a square foot, frustrating council’s goal to keep prices affordable for locals.
“We learned that until demand from offshore foreign investors is addressed by other levels of government, our efforts to add supply are not going to have a noticeable impact,” Booth said.
McMullin warned that policy-makers need to be aware of the impact of new regulations on buyers who may not be able to follow through with their presale contract because of “lifestyle” reason, such as losing a job. Most developers restrict presale assignments, she said, although they have been going up lately as condo values rise.
“Let’s say you do buy a condo (presale) and you get a huge promotion and the condo has gone up in value, shouldn’t you be able to sell that and then move up?” McMullin asked.