Government Attempts to Reign In Wild Vancouver Pre Sale Condo Market

Steve Saretsky -

Vancouver Pre Sale Condos Under Intense Scrutiny

I’ve been highlight for a while now just how out of control the pre sale condo market is in Vancouver. The sales process lacks transparency, prices are borderline comical, and flipping activity resembles that of the infamous Tulip Mania. The reality is, pre sale condos are the exact same as a futures contract and should be regulated as such.

Murky Sales Process

In the midst of a housing crisis, many developments are being accused of offloading supply at overseas sales centres. With overwhelming evidence of Hong Kong Sales Centres.

Surrey pre sale condo
Surrey’s Park Boulevard being sold in Hong Kong sales centres.

With the Vancouver real estate market in the midst of a speculative frenzy, pre sales have become all the rage for leveraging little money down and flipping (assigning) the contract for big profits before closing on it.

Assignments have exploded in popularity of the past year. Some developments such as Kensington Gardens has seen 16% of the building flipped with the project still one year from completion.

CRA Hunting for Tax Evasion

The rapid increase in assignment flipping has spurred Canada Revenue Agency to take several prominent developers to court requesting the names of owners in an attempt to hunt down assignors who have been flipping units and dodging capital gains taxes.

CRA successfully obtained court orders in July against the companies behind Marine Gateway and the Residences at West.

Now they’re targeting pre-sale buyers of units at Westbank’s Telus Garden and Concord Pacific’s One Pacific building in Downtown Vancouver.

Assignment Fees on the Rise

With a speculative frenzy whipping up windfall gains, some developers are now upping their assignment fees, proclaiming to curb speculation or perhaps, rather, grab a piece of the pie. One Burrard Place will now take 25% of the profit for any pre sale condo buyer who attempts to flips their unit before completion.

Not a bad idea, considering construction costs are on the rise and banks are getting tighter on financing.

Construction costs Canada
Construction costs on the rise in Canada
Construction loans declining
Construction loans decline

City of Vancouver Aims to Provide Locals First Dibs on Pre Sales

Now the city of Vancouver is proposing to clamp down on offshore sales, saying locals should have first dibs.

“Mayor Gregor Robertson will be introducing a motion at the next City Council meeting for staff to bring forward a policy by the end of the year that prioritizes sales of new homes in multi-family developments to local residents as part of the City’s new 10-year housing strategy. ‘Local residents’ are people who live and work in Metro Vancouver; whose permanent address and place of work is in the region, irrespective of citizenship.

“My priority as Mayor is to deliver new housing supply that is first and foremost for people who live and work in Vancouver, and this motion aims to give local residents the first opportunity to purchase a new home,” says Mayor Gregor Robertson. “In Vancouver’s red-hot housing market, local employers are crunched to retain talent, whether they’re doctors, tech workers, retailers, firefighters, teachers or nurses. I regularly hear stories about people who work in Vancouver, but are forced to move elsewhere in the region because they can’t find a place to live. At a time when we are seeing record levels of housing construction, local residents should be able to get the first shot at purchasing a home in new developments.”

Like this post? Get My Work Sent to Your Inbox HERE.



Join the Monday Newsletter

Every Monday morning you'll receive a short and entertaining round-up of news on the Vancouver & Canadian Real Estate markets.

"*" indicates required fields

The Canadian Economy

Steve Saretsky -

Happy Monday Morning! We got a string of new data this past week confirming inflation in consumer goods, and housing are proving to be more than transitory. Canada’s consumer price index continued to drift higher with prices hitting an 18 year high, up 4.7% from last October. The recent floods in BC...

Steve Saretsky -

The calls for impending interest rate hikes continues. CIBC’s chief economist, Benjamin Tal, was out recently suggesting the Bank of Canada could hike its benchmark interest rate at least six times beginning in early 2022. “I think there is a risk of getting into the market at today’s rates,” noted Tal....

Steve Saretsky -

The BC Government announced it is looking at several cooling measures for the housing market in 2022. They have highlighted two measures. The first is an end to the blind bidding process, and the other is a mandatory “cooling off period” which will allow any buyer a 7 day recession...

Steve Saretsky -

The Bank of Canada continues to slowly drain liquidity after flooding the system with a firehose of cash during the pandemic. Bank of Canada governor Tiff Macklem announced the end of Canada’s QE program (also known as money printing). Furthermore, in Macklems words, “We expect to begin increasing our policy...

Steve Saretsky -

Consumer price inflation ripped higher in September, surging 4.4% year-over-year, the fastest pace of price increases in 18 years. Let’s discuss this further. We have an inflation problem and the Bank of Canada remains of the view that inflation will be transitory. Although they really can’t say otherwise, for if...

Get the Saretsky Report to your email every month

The Saretsky Report. December 2022