A downturn in the residential real estate market could jeopardize some of the purpose-built and below-market rental units awaiting construction in the city of Coquitlam.
Coun. Dennis Marsden told The Tri-City News that because many rental units are provided through density incentives, they may be delayed if developers start putting the brakes on some of their projects.
“The affordable housing and the purpose-built rental, which we have been really looking to have, are tied to market projects,” he said. “If there is a slowdown on the market project, it puts that rental component that we need in jeopardy.”
Marsden’s comments come after Townline announced it would be temporarily postponing the sales launch of its Meridian project in Burquitlam. The 38-storey highrise development, which is slated to be built a block from Burquitlam Station, includes 54 purpose-built and nine below-market rental units.
Chris Colbeck, vice-president of sales and marketing with Townline, told The News there has been a lot of interest in the 261-unit project but buyers are reluctant to make a commitment.
As a result, the company decided against moving the project to the pre-sale phase, Colbeck said, noting that a certain number of pre-sales are necessary to meet provincial regulations and lending requirements.
“When you put the brakes on the supply chain… what you get is an eventual supply crunch once the current inventories are absorbed, ultimately causing a run-up on market prices,” Colbeck said in an email. “This applies to both market condos and desperately needed purpose-built rental units.”
Townline’s situation mirrors what has been seen in many parts of the Lower Mainland, according to Michael Ferreira, a real estate consultant with Urban Analytics. His most recent report found the number of new condos and townhouses sold in Metro Vancouver during the first quarter of 2019 fell 56% compared to the same time period last year — and it’s the third lowest quarterly sales total since 2010.
“Given the unrelenting headwinds and storm clouds battering the residential market in Metro Vancouver over the past 12 to 18 months, the lower quarterly sales total in the first quarter of 2019 is not a surprise,” he said.
Townline is not the only developer operating in Coquitlam that is closely analyzing sales figures.
Houtan Raffi, a vice-president with Beedie Living, which is in the process of building a Safeway and two towers on Austin Avenue, acknowledged the market has softened. But he told The Tri-City News it is difficult to compare current real estate sales numbers to those from two years ago, when transactions hit record-breaking heights.
While he said the company believes the market is “adequately strong,” Beedie is monitoring sales activity.
“When you have slower absorption, you have to be more mindful about the size of your projects and, of course, the phasing,” he said.
As for how Beedie intends to move forward with its Safeway site project, Raffi said “time will tell.” Construction on the retail portion of the project is well underway and the company said it expects to begin building its east tower this summer. Marketing for the west tower will commence in the fall or winter, he said.
The depth of the slowdown in residential development is still unclear.
Jim McIntyre, Coquitlam’s general manager of planning and development, said statistics the city tracks are, so far, on pace with numbers from last year. For example, there have been 14 rezonings in 2019 compared to 15 during the same time period in 2018 while the number of building permits has fallen slightly, from 212 to 195.
But one figure McIntyre said he is keeping an eye on is pre-applications, which have fallen sharply, from 15 at this point in 2018 to five so far this year.
“To my mind, that is the canary in the coal mine,” he said. “That indicates to me that there is a bit of easing up. There is uncertainty in the market.”
How long the real estate downturn will last is still an open question.
According to a forecast published by Central 1 Credit Union this week, home sales in B.C. will remain “marshmallow soft” for the rest of the year, with an 11% decline over 2018.
But when things begin to turn around, McIntyre said developers want to be “launch ready.”
He added that the last time the real estate industry experienced a downturn, developers may have been too quick to pull the plug on their projects.
“Everything just ground to a halt,” he said, noting that led to delays when sales picked up again. “When the market turned around they had to dust off their projects… Sometimes that took a bit of time.”
*An earlier version of this story indicated that Townline had already commenced pre-sales on their Meridian project in Coquitlam. However, the company had only started registering customers and had yet to commence the pre-sale process.