When Rennie Group publicly announced they’d be laying off 25% of their staff in response to the huge drop in condominium presales activity over the last two years, the real estate marketer made instant headlines.
The move underscores just how strained the development landscape has become that it's now announcing layoffs. And it’s also an alarm bell that the industry will need help from policy makers to re-stimulate the market, including the new federal government.
“These are really tough times,” said Rennie Group president Greg Zayadi in an interview. “The industry is changing. We’re having to pivot, and we all have to be realistic... I think transparency is key in today’s world....As construction stops and stalls, as developers can’t move projects forward, as companies like Rennie don’t have as much business as we once did.”
Zayadi noted that, conversely, companies were short staffed as buyer demand soared during the rapid acceleration of 2017 to 2019 and the COVID-related market peak of 2021. Times have changed, and Rennie Group – one of the biggest real estate marketers in Canada – reduced its staff from 123 to 92 people.
Other marketing companies are quietly doing the same, according to developer and real estate consultant Michael Geller. Geller, who’s been working in the industry since the 1970s, said the big news these days is when a developer finds a way to actually launch a presale project. A key part of the downturn is the absence of the investor.
Up until recently, condominium towers relied on the pre-sale of at least 60% of the building to obtain financing to begin construction. Around half of those pre-sale buyers were investors, but government policies and a higher interest rate have chased those investors away, including foreign buyers.
“[Foreign buyers] weren’t a major segment of the market, but they did buy, and they were part of that investor market,” said Geller. “People wanted to ban short term rentals and ban speculators, and they succeeded.”
Condos have subsequently lost their day in the sun, with the current market mostly driven by end-users, such as families who need affordable space to grow. That’s why townhouse developer Polygon is one of the few big developers who are selling in this market. But not enough end-users gravitate towards pre-sale units, which can take years to complete, and prove impractical for those who need a place to live sooner rather than later.
“It is one of the biggest downturns in part because projects can’t proceed without presales and the cumulative effect of all those legislative changes and taxes have taken the investors out of the market,” said Geller. “Right now, it’s an end-user market, and if you had to identify the most popular housing form right now it’s townhouses. Ground-oriented townhouses are generally seen as the most marketable and desirable type of housing rather than apartments and six-storey wood-framed buildings, and apartments in 20-storey buildings.”
Andy Yan, associate professor of professional practice in urban studies at Simon Fraser University, said the fact that townhouses are still marketable, while presale condos aren’t, is a sign that the market and resident needs are two different realities. People want housing to grow families, or to live in for many years, while the market is producing tiny studios and one-bedrooms more suitable to investors who are speculating on ever-increasing values. In Toronto, the proliferation of tiny condos earned them the nickname, “dog-crate apartments.”
“They’re building Mini Coopers while people need station wagons,” said Yan.
Despite the downturn, prices have only softened by about six per cent since 2022, according to the Real Estate Board of Greater Vancouver. But the benchmark price also increased 57% in the last 10 years, so the six per cent drop isn’t going to generate an affordable housing market for most buyers. That detached house they’ve been coveting still averages $2 million.
Based on recent housing announcements, it’s predictable what policies the federal government will likely focus on. Newly minted Prime Minister Mark Carney and new Federal Housing Minister and former Vancouver mayor Gregor Robertson, continue to beat the drum for more supply as the answer to affordable housing. Robertson had downplayed the impact of foreign wealth into the Vancouver market when he was mayor from 2008 to 2018, choosing instead to focus on the lack of housing supply as the bigger problem. During his tenure as mayor, the city was criticized for approving too much luxury supply and not enough affordable supply. It’s not clear what will be different this time around, unless the federal government resurrects the old subsidized co-operative housing model.
Meanwhile, policies that stifled speculation and offshore investment may now be unnecessary obstacles, say industry players.
The question for politicians is whether it’s worth angering citizens who blame foreign wealth and speculative behaviours on the lack of affordable housing. At its peak, the investor-owned condo market was rife with short-term rental, which was subsequently stifled by provincial and federal policies.
Yan said the policies could use tweaks, but they remain necessary if the goal is to produce liveable, affordable housing for those with local incomes.
“The government needs to respond to the basic question, ‘who are we building for?’ and close the gap that the market sector is not addressing. Under Gregor Robertson’s tenure as mayor, there was a city high-water mark of 9,759 housing starts in 2016, spanning the 1984 to 2024 period, that hasn’t been seen again. But what got built was a lot of housing that is unaffordable and unsuitable for people who wanted to set down roots in the city. This is ultimately why his Vision party lost the election and disappeared. The BC Liberals lost for the same reason. The federal government would be wise not to repeat the mistake of focusing merely on supply, when the problem needs a multi-pronged approach that involves not just housing supply and addressing true demand but achieving the financing to build that supply. As for housing policy, it needs to ensure the supply that does get built isn’t intended as a commodity for investors and speculators, both local and global.”
Jon Bennest, Vice President for Product Development at Zonda Urban data company, lists the current regulations that he says work against an investor who’s looking to buy a condo in downtown Vancouver.
“You can’t be a foreigner based on certain policies that don’t allow foreigners. If you don’t live in it yourself or rent it out long term, you’re subject to three separate taxes: the City of Vancouver’s vacant homes tax, you’re subject to the provincial speculation tax, and the Canadian government under-utilized housing tax. And then there’s also an Airbnb ban. The purpose of the Airbnb ban was done by the BC government to suggest, ‘this is taking away housing from people who would otherwise be living in it,’ but the interesting result of that is downtown, in terms of new applications... a lot of developers who’d normally build condo projects downtown are actually applying for hotels. So, we’re going to see less housing supply for people in the downtown market as a result of this shortage in vacation rentals downtown relative to demand.”
Bennest said the downturn isn’t as bad as the 2008 and early 2009 global financial crisis, but it is more prolonged this time. He agrees that low-density housing forms are driving the current market.
“There’s an increase in demand for townhome and affordable low rise, a shift of demand into affordable suburban locations. And then also you are starting to see certain areas where developers have product completed and unsold.”
Bennest said that foreign buyers have a role in the financing of new housing supply.
“If the goal of the... market is to build new homes, restricting buying from whatever group is potentially resulting in a lot of these projects not going ahead,” said Bennest.
“I understand one perspective, that we don’t want foreign buyers buying real estate that kept locals from buying, but at the same time what about the scenario where you have a 100-unit building you had 50 locals and 10 foreigners that bought. If you only had the 50 buyers, you couldn’t get it built. But if you had 10 foreigners, you’d get [to 60% sold] and you’d get all 100 units built, and then the other 40 that aren’t sold would get brought to market.”
