4 days ago
In a challenging market, a few brave developers push forward
The federal government last week made good on its promise to give first-time home buyers a break on the GST on new homes – a move the industry hopes is just one of many lifelines they'll be thrown.
Across the country, thousands of completed homes are sitting unsold, and the industry is hoping the GST break will get sales moving.
Rennie Marketing Systems has forecasted nearly 3,500 unsold units will sit on the Vancouver area market by year's end. In Toronto, the estimate is close to 24,000 unsold units, according to the research and consulting firm Urbanation.
Prime Minister Mark Carney campaigned on the promise to build over the next decade almost half a million homes per year. James Innis, president of Vancouver's Sutton Group Realty, said the Liberal government must know that if they're to achieve that goal they need to help clear out the thousands of existing unsold units, which he called 'a new phenomenon.'
'Is this policy partly there to say, 'Okay, we know that there are thousands of units available in Canada. Can we make them more accessible?''
Like others, he would like to see the GST policy expanded to all buyers, not just first-time buyers.
Canadian Imperial Bank of Commerce deputy chief economist Benjamin Tal said the GST break will help at the margins, but the industry needs to continue to build. And there aren't many developers building right now, except for those counting on a market upturn by the time they complete.
'We have a lot of inventories. But, you know, population growth is still rising. Investors will be back in the market, interest rates will be lower and lower, and those inventories will start going down and the demand will be there,' said Mr. Tal.
'And that's something that many of those pioneer developers, if you wish, are counting on. It's a risk. It's a gamble, because nobody can calculate exactly how long it will take to get rid of the inventories. But that's more or less the rationale there.
'So, we are seeing a situation in which some of the big [developers] are taking the risk and saying, 'You know what? The market will wake up two or three years from now.' And they are absolutely right.'
Mr. Innis concurred, saying it is only the 'brave and the bold, and the well capitalized' that would attempt to push on with a major project in the current market.
Critics say proposed GST rebate won't help most first-time homebuyers
Developer Grosvenor, which has been active in the Vancouver market for 70 years, is one of the brave ones. The company announced this week that it will start construction on a 41-storey, 451-unit condo tower and two rental towers at the Brentwood Block in Burnaby, B.C. – one of the region's largest construction launches in recent years. It is the first phase of a larger master-planned community that, once complete, will deliver 1,730 units, more than half of them rental.
Marc Josephson, Grosvenor's senior vice-president of development, said the company has the confidence to start construction because of a successful presale launch last fall, in which they sold more than 100 units in the first month. Consumer confidence may have since tanked, but Mr. Josephson said that in the long term, the region is still undersupplied.
'This is one of the first construction starts in the region and one of the largest,' he said. 'And one of the reasons is when we launched in the fall, we had success.
'Despite the well-documented conversation about slow sales in the first quarter of 2025 – and no doubt they were slow – things were picking up toward the end of last year, and we were an example of that.
'There are so many factors that determine when you move forward. If you are on a different time scale, and perhaps starting sales right now, that's a different story.'
Meanwhile, Square Nine Developments is using marketing incentives to unload some sitting inventory. The company slashed prices on 77 units at its completed Belvedere project in Surrey City Centre last Saturday, reducing the price per square foot from $1,000 to $720. The result was a long lineup and the sale of 63 units, half of them to investors, according to Key Marketing, whose president Cam Good has been offering the occasional 'Condoday' flash sale discounts as one-off events since the 2008 market downturn, for projects in serious need of a boost. He also recently promoted another Surrey project, SkyLiving by Allure Ventures, that gives buyers the option to sell the unit back to the developer at the original price, or lease the unit back, ensuring cash flow if the buyer is an investor.
Back in 2021, Square Nine had sold 200 units at the Belvedere, at the original price. They'd held back the penthouses, hoping to get an even higher, price and chose to rent out the units at the podium level. Now, they're selling all the units, including the rental. Mr. Good said that servicing the debt on the remaining 77 units would have amounted to about $300,000 a month for the developer. Instead of paying a lender, they'd rather sell off the units at cost or even slightly below and take their money and move on to finding their own deals on reduced-price development sites, said Mr. Good.
'It's no big deal. There are 275 homes in the building. They still made money – they sold [about] 200 at a good price. … Everybody wins, the developer made money,' said Mr. Good.
He expects to do several more Condoday promotions this summer. He said he enjoys doing them, because his usual job is 'making developers rich.'
'And 70 per cent of our buyers are first-time homebuyers.'
Barrett Sprowson, senior vice-president of sales and marketing for Peterson Group, called the GST break 'a great first step' in a surprisingly severe market downturn. His company has a 69-unit Oakridge project called the Ashleigh that they are starting construction on, but Mr. Sprowson said they wouldn't have been started if it had been a 400-unit building.
'It's certainly the most protracted downturn we've seen. That's the thing that makes it hard, and that's why the cracks in the industry are showing up, because it's been so protracted. No one really thought it would be this long,' he said.
'I was encouraged by Carney's housing platform in that it seemed there'd been some listening to things the industry has been saying for a while.'
Government could help with a break on high development fees and also incentivizing the investor to get back into the market, he said. Mr. Sprowson said the investor plays a role in driving sales and has been too often vilified. The foreign buyer, too, serves a role at the high end of the market, he said.
Matthew McClenaghan, president of Edgar Development, said his company is about to start construction on 138 units of rental in Port Moody, B.C. He's confident in rental, but thinks it's a good time to hold off on condos.
'We all are watching to see which presales launches are achieving a modest level of success,' he said.
'I have been in this industry for over 25 years. I have seen this movie before. We, as an industry, run faster than buyers do. While the story is that there is an abundance of new homes on the market now, after these get absorbed, there will be little in the pipeline to replace it.'
