Homebuilding poised for revival
Developers are moving ahead from a dismal 2009, with CMHC forecasting 13,000 starts this year
The Onni Group kicked off 2010 by launching three new suburban highrise condominium projects, Polygon Homes laid out a plan to increase its construction by 20 per cent, and across the industry builders are ramping up activity.
Canada Mortgage and Housing’s forecast is for 13,000 starts this year, but the final numbers will depend on how an expected mid-year increase in mortgage rates affects consumers’ ability to buy, how willing banks will be to extend developers credit and the general state of the economy.
Chris Evans, executive vice-president of the Onni Group, said the tighter financing requirements that banks put in place after the financial crisis definitely still exist.
“Financing took a year off, in a lot of respects,” Evans said.
He said developers now need to put more of their own equity into projects, and those projects require a higher percentage of presales with buyers putting down bigger deposits.
Evans said projects now typically require 20 to 25-per-cent deposits, whereas at the height of the building boom, developers were pre-selling units with deposits as low as 10 per cent.
The recovery of Metro Vancouver’s resale market, however, has spurred Onni into taking on new projects.
“I think for us, we started to look at [plans for] 2010 probably as the summer rolled round and the market seemed like it had found some resilience,” Evans said.
“There had been a correction in prices, and at that point there had been some correction in construction costs.”
With those lower costs, Onni, in November, re-priced and relaunched the Main Street area V6A highrise it had taken off the market in 2008 without any sales.
“We re-priced it at 25 per cent off where we launched it in 2008 and found great success,” Evans said.
Onni launched two other projects with strong presales last fall. One was called Social, a failed project that Onni took over from the Eden Group, which tried to market it in 2007; the other was The Mark, a large tower at Seymour and Pacific.
That emboldened Onni to launch new projects, one each in Coquitlam, Port Coquitlam and Port Moody, albeit within the new pricing environment, which Evans said ranges from 15 to 20 per cent below peak values during the boom.
“Presales are probably selling at a bit of a discount over the [resale] market pricing, which is a huge change from 2005 to 2008,” he said adding that that “is probably the correction that needed to happen.”
Full article at The Vancouver Sun
