SPECIAL TO THE GLOBE AND MAIL
Vancouver locals are about to get first crack at some new condo projects in the region, as developers are either being forced to comply with new regulations or they are voluntarily changing tactics as they face an increasingly irate public.
As the city’s real estate market continues to move out of reach for many local residents, reports of condo units being presold to foreign buyers have generated anger and concern.
So now at least three projects in Vancouver are moving to a locals-first strategy when preselling and more are to come, say marketers and city officials.
One is a high-end tower downtown being built by Bosa Properties, which is the first to adopt a “locals-first” selling campaign just in advance of a new city policy.
One condition of the project’s approval at a public hearing this past week is that only people who live in British Columbia or work in the Vancouver region be eligible to buy for the first 30 days – if they can afford a luxury condo in the 42-storey tower.
The other is a much more modest tower on the city’s east side, where the city didn’t require the developer to market to locals first. A citywide policy is expected this year, but it’s unclear when.
But the developer has decided that locals-first is good business.
“We are doing this voluntarily,” said Payam Imani, whose company, Imani Development Inc., has been building single-family homes and, more recently, small condo projects in the region for 30 years.
That means it is taking his company longer than usual to sell the 126 units of the Windsor, which are going for just less than $1,000 a square foot on average. About 70 have sold in the past few months.
“But we’re not here to sell out a project instantly and necessarily maximize the revenue,” Mr. Imani said.
The locals-first initiative is just one of many strategies that Vancouver and other cities in the region are experimenting with, along with limits on short-term vacation rentals and taxes on empty homes, as they try to grapple with a housing market that feels increasingly out of reach for average buyers.
The City of Vancouver is developing its locals-first policy, while both the City of Port Moody and the District of North Vancouver directed their staffs last fall to look at something similar.
A statement from the city said the new policy, which Bosa has agreed to even though it’s not legally in place yet, will require “developers of all large-scale rezonings to restrict sales to locals for the first 30 days of presales.”
The policy will also limit bulk sales and include provisions that limit buyers from flipping their presale units before the building is completed. The Bosa project has that last requirement spelled out in detail, with a condition that anyone who flips a presale unit by selling the contract must pay an “assignment fee” equal to one quarter of the increase in value.
Imani Development has a unique provision in its conditions, stipulating that a foreign investor can buy a unit only if that buyer agrees that the contract is void if a local buyer comes along and offers the same price for it within 90 days. Only one of the 70 buyers is a foreigner who has agreed to that so far.
Westbank agreed to a locals-only period for a project in West Vancouver last year, at the request of the council there, but it did not produce many local sales – something Councillor Mary Ann Booth blamed on price. Westbank has also initiated a locals-only block of time for its Butterfly project on Burrard, but the project is selling for $3,000 a square foot.
However, in spite of all the legalistic-sounding language, many wonder whether the new initiatives will have any impact – either because there won’t be any real change in the market conditions or because it’s difficult for a non-government operation to really enforce a local-buyer rule.
“I don’t think it’s a good idea to outsource this job to developers, who generally have poor incentives and ability to enforce,” said Tom Davidoff, a University of British Columbia professor who is a specialist in real-estate finance.
He said government initiatives, such as Vancouver’s empty-home tax, or a proposal that he and other economists have suggested the province adopt – a scheme where owners pay a high tax for homes if they have no local employment or rental income – are much more effective.
Mr. Imani acknowledged that all his company can do to verify whether buyers are locals is to ask for proof that they are permanent residents or Canadian citizens.
For the Bosa building, the company will ask buyers to sign a statutory declaration saying that they live in B.C. or work in Metro Vancouver and plan to live in the unit they’re buying.
Michael Ferreira, whose company Urban Analytics closely tracks condo developments and sales, said it’s unclear what the impact will be on real estate prices over all, although there may be other good reasons for a developer to have a locals-first approach.
“In some ways, it’s smart marketing,” said Mr. Ferreira. But, he said, it’s often the price – not the restrictions on who can purchase – that determines who the buyers are.
Westbank Corp., which is doing a Japanese-designed tower on Georgia Street, a Bing Thom-designed tower near Burrard Street, and the striking Vancouver House going up around the Granville Street Bridge, has set very high prices.
“It’s those big luxury products, where the developer is trying to push prices, that they need to open the door [to foreign buyers],” said Mr. Ferreira.