Developers in Metro Vancouver turning to bulk condo sales amid weak market | Daily Hive

Some developers in Metro Vancouver turning to bulk condo sales amid weak market

Burnaby residential towers under construction. (StandbildCA/Shutterstock)

Some condominium developers in Metro Vancouver are turning to bulk sales — selling multiple units at once to a single buyer — as the housing market slowdown drags on.

In an interview with Daily Hive Urbanized last Tuesday, Mark Goodman, the principal of local real estate firm Goodman Commercial, says the shift reflects mounting pressure on developers dealing with slow sales and rising costs of holding onto immense inventory.

He describes the current market being caught in a “tug of war” between price maximization and an urgency to exit.

Earlier this month, his company began listing a bulk condominium sale of up to 30 units within a brand-new, six-storey, woodframe building in Surrey City Centre.

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He says the interest for this bulk deal in Surrey has been immediate, sharing that two dozen people reached out within the first couple of hours it was announced, with about 50 groups expressing interest overall as of early last week. He estimates that about half of those are serious buyers, while the rest are competitors or observers trying to understand the market.

While buyer interest remains strong, more developers holding unsold inventory are increasingly considering bulk sales as a viable path forward, especially after seeing his listing, which is making its ripples in the local market.

“It certainly piqued a lot of interest,” Goodman told Daily Hive Urbanized during the interview.

“I literally just got off the phone with this other developer who needs us to sell 18 of the remaining units on their project in East Vancouver. Everybody’s feeling the pinch right now.”

In another call, says Goodman, a broker has been trying to sell roughly eight units in a Victoria townhouse project.

In some projects, sales have slowed to just one or two units per month — meaning that at such a snail pace, it could take years to sell out completely.

That kind of delay is extremely costly. Developers must continue paying taxes, insurance, and financing costs while unsold units sit empty. For this reason, some developers are increasingly willing to take a slight upfront loss.

Bulk condominium sales typically involve offering units at a discount — often 15 per cent to 20 per cent below current asking prices — to attract investors.

“It’s this race against time, which I think is a value proposition as they say, ‘Oh, f*ck it. We’ll take a bigger loss, but I won’t be stuck dealing with this for two years,'” he said

“In return for reduced pricing, you could conceivably have a deal in closing in 30 days and skip out all the associated costs with holding it for so long.”

For buyers, Goodman notes, the main appeal is not just the rental income, but the chance to sell later at higher prices.

He says there is a growing consensus that given the gravity of the current economic headwinds within British Columbia, the local real estate market’s turnaround will not happen until 2028 or 2029.

With new construction activity slowing significantly, many new housing projects are being put into a holding pattern. Very little is being built, other than the projects that began construction years ago and are now nearing completion.

There is a concern that there will be far fewer new homes in the near future, which could push prices back up when the demand returns, given that the real estate market is always cyclical. Once the current inventory is sold and construction remains limited, a housing shortage could emerge again.

“The value proposition for an investor is the exit strategy in two to three years,” said Goodman.

“If you’re a betting man, there’s going to be a lack of supply in two to three years.”

Still, he noted the current downturn stands out compared to past cycles in his decades in the industry, which were typically shorter and less severe. By contrast, he described this one as a “brutal, long, drawn out trajectory” driven by a mix of economic factors and policy changes by the BC NDP-led provincial government of Premier David Eby.

“I’ve never seen a cycle like this,” he added.

“You can blame it all on David Eby and quote me on that because he’s manufactured a lot of the problems we’ve had in this province.”

In the meantime, investors in this bulk sales strategy can still earn rental income while they wait.

“If it doesn’t work out, at least you’ve got a decent yield coming in,” Goodman told Daily Hive Urbanized.

He says investors run the numbers by estimating rental income and subtracting costs like strata fees, property taxes, insurance, and maintenance to calculate a return, known as a cap rate.

But Goodman says there is a key trade-off: the bigger the upfront discount, the less investors worry about rental income over the subsequent years — and the more they focus on future resale value and the potential capital appreciation years down the road. Currently, amid a significant surge in new secured purpose-built rental housing completions, lower immigration levels due to federal policies, and economic headwinds, there has been a downward pressure on rents.

“There’s an interplay between yield and price per square foot,” he said.

Much of the interest in these bulk deals is coming from experienced, large-scale investors who already own rental housing.

“There’s only about 3,400 [secured] purpose-built [rental housing] buildings in the city in Metro Vancouver controlled by 2,300 groups. That’s it. That is the entire ecosystem,” said Goodman.

“So, these 2,300 owners that own and manage 3,400 purpose-built buildings, they live and breathe this market. They have the know-how to deal with the management.”

For them, bulk condo purchases offer a relatively low-risk way to expand. The buildings are new, meaning fewer repairs, and the units can be rented out or sold individually later.

Unlike traditional rental buildings, these investments also offer the option of selling units one by one — potentially at higher prices.

“I can get a four per cent cap rate for brand new product… I can buy it now… at 25 below peak market values,” explained Goodman.

This bulk trend is also gaining traction elsewhere, especially in Toronto.

Bulk sales could put some downward pressure on condominium prices, especially if more developers follow this approach, says Goodman. There are also concerns that discounted bulk deals could affect financing for buyers who purchased earlier at higher prices.

“What happens if the banks and the lenders find out that… we’re offering $200, $250 per sq. ft. lower than what they paid for it?” he said. “They might not get the same loan or some of these investors will say, ‘I’ll just walk from my deposit and take a loss.'”

Because of this, some deals are being handled quietly at first, with information shared only with select buyers. When all of the units close, the marketing process will become more transparent.

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