Price of units lower, but still no bargain, expert says

Price of units lower, but still no bargain, expert says

Even at reduced prices, it's unlikely taxpayers will fully recoup $740 million invested in project, according to UBC professor

 

The new prices for condos in the taxpayer-owned Olympic village are more in line with the rest of the real-estate market, but they're still no bargain.

That's the analysis of a real estate expert and a business professor who say it will still take years to fill out the Southeast False Creek project.

And even then, it's unlikely that taxpayers will fully recoup the $740 million they invested in the project through construction financing and land sales.

On Thursday, condo marketer Bob Rennie set the stage for the sale of 230 units in five buildings starting today.

He laid out for reporters and fellow real-estate agents an average price reduction of 30 per cent for the units, which make up about half of the 474 unsold units in the village.

Some units, principally the more expensive ones, have been reduced by as much as 50 per cent, while price cuts on smaller lower-priced units are closer to five and 10 per cent.

But Scott Brown, the vicepresident of residential marketing for Colliers International in Vancouver, said those cuts may not be enough.

"It's definitely come down from where it was, which tells you how far out of reality the prices were. They were really out of whack," he said. "I don't know if they have come down far enough to drive any really serious volume."

Brown said Colliers' market research has shown that threequarters of sales in the area have been for units priced at $650 to $750 per square foot.

But most of the new prices in the Olympic village are still higher than that. 

Brown cited a 1,445-squarefoot two-bedroom unit now offered at $1.3 million. At nearly $900 per square foot, "that's not a deal," he said. "Those prices are not low enough yet where people will say, 'This is such a deal I've got to buy it now.'" Tsur Somerville, a professor at the University of B.C.'s Sauder School of Business, said he thinks Rennie's overall repricing strategy will eventually drive enough sales for the city to recover the remaining $570 million it loaned for construction.

But he's doubtful there's enough residual value left to also cover the outstanding $170 million owed on the city's sale of the land to the project's original owners, Millennium Developments.

"I think it is reasonable to say that it is highly unlikely that the taxpayers of Vancouver will see the full value of the lands the city contributed to the project," he said.

Somerville said the prices are competitive with other built projects in the city but not for those being sold on the basis of pre-sales, where buyers put down a small deposit and have longer to pay. By Thursday, a dozen people had camped outside the sales office, waiting for today's opening sale.

Rennie said the lineup was encouraging and he expects to see a crush of potential buyers on the weekend. However, the lineup pales in comparison to the interest in other condo developments in Metro Vancouver.

On Saturday, Bosa Properties will open its sales centre for its 45-storey 202-unit Sovereign tower in Burnaby's Metrotown.

Earlier this week, more than 400 people lined up and 2,600 signed on to a company website.

The company sent people home after giving them numbers reserving their place in line, said Bosa vice-president Daryl Simpson. He projected that up to 70 per cent of the units, priced at $650 a square foot or less, will be sold by the end of the weekend. Rennie told reporters that demand in the Olympic village can't be compared to pre-sales at other developments, noting he'd sold all but 11 of 540 pre-sale units in Wall Centre False Creek behind the village.

Pre-sale buyers put down 10 to 20 per cent and have up to three years to pay. But with built stock such as the Olympic village, buyers have to complete their sales in 60 or 90 days. For that reason, Rennie expects upwards of 70 per cent of buyers in the village will be people wanting to live there or buying for their family. There is little true investor demand for the units, he said. Brown said he thinks Rennie's prices may only translate into four to eight sales per month. "I don't think necessarily they will do 20 or 30 transactions a month and shoot the lights out."

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