Vancouver housing slump evident with cancellation of $500M Ritz-Cartlon project

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This article was published 25/02/2009 (6410 days ago), so information in it may no longer be current.

VANCOUVER, B.C. – The cancellation of a $500-million luxury hotel and condominium project in downtown Vancouver is the latest in a string of troubled developments in Canada’s most expensive real estate market which experts say is in a serious slump.

“Vancouver’s market is already crashing, it’s no longer a question,” said Brian Ripley, CEO of consulting group Oakes Ripley & Associates Inc.

Ripley believes Vancouver will be one of the hardest hit in the current reversal of housing prices across Canada because its prices ran up the most and is now the least affordable city in the country.

The credit crunch and economic downturn are wreaking havoc in Vancouver’s real estate market where sales are on a steep slide and prices are falling.

Some condo developers are giving away cars and cutting prices by up to 40 per cent to try to unload unsold units. There are also lawsuits flying between developers and buyers attempting to walk away from pre-sale contracts.

Another red flag for Vancouver’s real estate market came Tuesday when the Holborn Group halted its 60-storey Ritz-Carlton project in the city’s downtown after only 62 of the 123 units were sold.

“It would be really foolish for us to go ahead with the project,” said Holborn president Joo Kim Tiah.

The development would have been the second-tallest building in the city and was scheduled to be completed in 2011. Prices ranged from between $2.5 million and $10 million, with the penthouse set at $28 million. Buyers will get their deposits refunded.

Tiah said the goal was to sell 75 units because “the banks are looking for a higher level of pre-sales” in the current credit crisis.

He would not comment on rumours of a smaller-scale project is being planned for the same site.

Ripley said developers are generally ahead of the market when it comes to making a decision on whether or not to proceed with a project.

“Their decision can be influenced by a third party, like the lender. If the lender won’t advance the next tranche in financing, and no other lenders are forthcoming, then the decision becomes pretty easy,” said Ripley.

“Developers knew the top was in last year, it is not a mystery, they get feedback from their sales department. The timing of when a project gets cancelled depends on how long they can meet their obligations.”

Another high-end development in Vancouver – the 61-storey, 191-unit Shangri-La that is the city’s tallest building – was completed earlier this year.

Many of its units are currently being posted for sale and rent on local websites at prices considered cheap by Vancouver standards.

Cameron Muir, chief economist with the B.C. Real Estate Association, said luxury developments are likely being hurt because of they are priced at the high end of the market.

“That particular market segment is certainly more hard hit by the sharp drops that we’ve seen in the equity markets,” Muir said.

The B.C. Real Estate Association reported home prices in the Greater Vancouver area fell 8.8 per cent in January to $536,162 compared to the year before, while unit sales fell 58.5 per cent year-over-year.

It forecasts prices in Greater Vancouver to fall 14 per cent in 2009 to $508,000 from the average prices reached in 2008, and another three per cent in 2010 to $495,000.

Sales in the Greater Vancouver area are expected to slide 10 per cent in 2009 to 22,700 units, but increase 10 per cent in 2010 to 25,000 units.