Welcome to the 2024 Presale Market: Embracing Quality
I feel privileged to engage in conversations with key players shaping the local real estate market, particularly those introducing new supply. While most media turn to pundits and academics, it's the decision-makers in the trenches—developers, investors, financiers, and consultants—who handle multimillion-dollar decisions.
Furthermore, I see myself as a continual learner in the local market. With a decade of experience ranging from a new home market analyst, development strategist, and multi-family broker, I consistently acquire insights and uncover trends shaping the local condo and townhome market.
The volatility of the 2023 market uncovered vulnerabilities, with reports of developer challenges, receiverships, and unfulfilled promises, often linked to the high-interest-rate environment. It served as a reminder of how market euphoria can also pose risks.
That's why I consistently advise clients to prioritize top-tier product, emphasizing a strong development team and proven delivery capabilities. Yet, identifying these factors isn't always straightforward. A knowledgeable realtor can play a crucial role in guiding you through these considerations.
With that in mind, here are my predictions, thoughts, and strategies for the upcoming 2024 market.
Overall Presale Market Activity in 2024: Most Active Markets
It’s no secret that in certain markets across the region, the achievable price per square foot (PSF) has hit a ceiling, making it harder for developments to get off the ground.
While some projects have managed to achieve success in terms of sales, the shallow pool of potential buyers has significantly restricted the number of new projects entering the market simultaneously, which is highly needed in times like today where available housing is severely limited.
This trend is most notable in areas such as Vancouver and Burnaby, where one can expect to pay $1,400+ PSF for new concrete development.
When a price ceiling is reached, investors adapt and shift their focus to areas they believe offer superior growth opportunities for the future.
As such, I expect the following markets to be the most active presale markets in 2024:
Tri-Cities (Coquitlam, Port Coquitlam, and Port Moody)
Impact of Immigration on Rental Rates and Presale Property Demand
Canada's population surged by over a million in the first 9 months of 2023, with 430,635 added in Q3 (July-September). StatCan attributed 96% of this gain to international migration.
British Columbia, specifically the Lower Mainland, is considered a top destination for these newcomers.
Immigrants initially rent homes, boosting demand for rental homes.
With the government targeting 985,000 more residents by 2025, the rental market is poised for sustained growth.
Investor interest in the condo market will continue to rise, given that this segment provides the most budget-friendly option for rentals.
As interest rates begin to gradually decline, the increase in rents over the past 2-3 years will soon make even the new norm of interest rates appear more attractive for investment.
Interest Rate Impact on Presale Market
The most recent reports suggest that interest rates have reached their highest point, and there are expectations of multiple decreases in 2024.
I'm anticipating an increase in demand for presale condos in affordable markets such as Coquitlam, Port Moody, Langley, and Surrey, led by investors who have been on the sidelines over the past 18-24 months waiting for rates to peak.
Investors can seize opportunities in the region due to sustained population growth and continued housing shortages. With extended completion timelines, they can speculate that today's prices will prove profitable in the next 2-4 years.
Currently, developers are pricing projects based on market feasibility, requiring sharp and market-aligned pricing. Investors, being mobile, swiftly move on from developments with unrealistic pricing expectations.
Concerning criteria for presale investments, here are the guidelines I currently employ to steer clients' investment decisions:
💎 high-rise (concrete) projects with staggered deposits and completion timeframes ranging from 3 to 4 years (2027-2028).
💎 low-rise (wood frame) projects with reduced deposit requirements (10%) and completion within 2-3 years (2026-2027).
Incentives Driving Presale Investors
In 2023, investors took advantage of opportunities in projects that offered incentives not commonly seen in busier market times.
During the second half of the year a total of 13 new high-rise projects in Burnaby, Tri-Cities, and Surrey brought around 4,100 units to the market, with over 50 percent already reported as sold.
I anticipate that upcoming presale projects will continue offering incentives to boost demand, including:
Reduced deposit requirements
Lowered assignment fees
Buyer credits (e.g., covering 2 years of strata fees)
It's essential to note that these incentives might disappear once developers believe the market has turned a corner.
Navigating Future Presale Development Choices
Due to the sluggish real estate market in 2023, influenced by elevated interest rates and economic uncertainty, numerous developers postponed new project launches.
This situation has created an opportunity for multiple projects to be introduced to the market at the first signs of economic optimism.
In navigating this landscape, I’m advising clients to focus exclusively on high-quality developers, ensuring that their investments align with reputable and reliable projects poised for success in the recovering market.
Exciting upcoming developments and master-planned communities are set to enhance the region's overall growth and appeal. This infusion of new energy and excitement is expected to boost investment sentiment.
Some of the more notable master-planned communities I'm keeping an eye on include:
Wesgroup's Civic District in Surrey City Centre
Bosa's next phase of PARKWAY in Surrey City Centre
Marcon's TriCity community in Coquitlam Town Centre
Wesgroup's Coronation Park in Port Moody
Zenterra's Latimer Walk in Willoughby, Langley
Polygon's Semiahmoo community in South Surrey
Cost of Construction will Lead to Condo Price Appreciation
Whether it's the expense of materials, labor, consultant fees, or development costs, prices continue to climb annually.
Despite a historical upswing in costs over the past two years due to inflation, I anticipate no relief or downward pressure on the above-mentioned costs in the near future.
Consequently, I believe that the escalating construction costs alone will drive up new housing values, presenting a boon for investors leveraging current market incentives in actively selling projects.
Moving forward, new projects will inherently incorporate these increased costs, further enhancing the value of presale purchases made today over those made 1 to 2-years from now.
Considering a Presale?
Numerous factors come into play when acquiring a presale. While developers and sales & marketing firms aim to showcase the opportunity as the best in the market, your real estate agent plays a crucial role in steering you in the right direction.
Consider the following factors when buying a presale investment:
Pricing analysis (versus other product and resale supply)
Supply/Demand in the neighbourhood
Rental market fundamentals
Catalyst for price appreciation