A Vancouver realtor is irritated that would-be buyers are increasingly missing out on condo sales due to developers selling out units to friends, family, and investors before opening to the public.
Steve Saretsky, the Vancouver realtor who made news last month for his comments on real estate speculation, is concerned the high turn-over rate for residential units at the freshly-opened Telus Garden tower shows how unattainable the Vancouver condo market is becoming.
The 53-storey LEED Platinum-certified Telus Garden building at 777 Richards Street began selling its 428 residential units back in 2012, but the public never got the chance to make a bid.
Telus employees were some of the first to be offered the opportunity to buy into the building, at a one per cent discount, and some 150 of them scooped up just over a third of the units during the VIP pre-sale in April 2012. At the time, the condos were for sale from $279,900 to over $3 million.
The other two-third of buyers were likely friends and families of the developer and marketing agencies, and big-wig clients with well-connected realtors, according to Saretsky, who wrote about this issue in a blog post Wednesday.
Before regular buyers even had the chance to make an offer, the building was completely sold out.
Saretsky says 16 per cent of units have already been flipped for profit since the private pre-sale four years ago, and that number is likely to increase in the coming weeks as owners finally get the keys to their finished condos.
“It’s probably more than 16 per cent because a lot of assignments are done privately and not advertised on the MLS. There’s a pretty good chunk done privately. It’s more probable it is at least 20 per cent.”
Because he is a realtor, Saretsky was able to access all the MLS sales data for the building.
A total of 68 out of the 428 units have already changed hands with nine currently listed on the MLS. The cheapest is a $589,000, 515 square-feet, one-bedroom on the 33rd floor. They range upwards in price to a $1.79 million, 1,166 square-foot unit with two bedrooms.
Saretsky says according to his data, the first unit was flipped in July 2014, just after ground was broken on the Richards Street tower. He isn’t able to determine how much of a profit the seller made, but he does say the average selling price of the 68 resold units is $740,562 so far.
But Saretsky says he’s not out to vilify speculation and home-flipping.
“Personally I have no issue with people assigning contracts and flipping them for a profit. It’s their investment they can do whatever they please,” he said in his blog post.
What he does take issue with is the common argument that Vancouver’s housing crisis can be solved by increasing supply.
“Everyone keeps talking about the supply, especially the B.C. Liberals, but all the supply that is coming up in Vancouver is, first of all, the majority is not affordable for locals. Second of all, it’s pretty much impossible to get your hands on any of that supply. Unless you have direct ties to the developer, you don’t stand a chance,” he told Global.
However, Magnum Projects Ltd. head George Wong, who spearheaded the Telus Garden marketing campaign, and developer Westbank refute the accusations that the public missed out.
“The public had an opportunity to purchase units,” Wong said. However, he added: “Demand was very strong and sales happened quickly before any broad marketing was initiated.”
Westbank also said: “The interest from pre-registration and opening week-end was such that we did not feel a full marketing campaign was required.”
Regardless, Saretsky maintains it is an ongoing problem.
“Everything is basically pre-sold and once the public has access to it, it is basically resold to them at a higher price.”
He adds that issues like foreign investment, or wealthy non-locals treating Vancouver real estate like a commodity stock, is what needs to change in order for locals to find their place in the city.
“Nobody locally is going to pay $1.5 to $2 million for a two-bedroom apartment.”
And part of that includes regulating how much of a building can be pre-sold.
“What is considered fair in the industry is only pre-selling 60 per cent of the units in a building.”
He points to a Concert Properties development, Navio on the Creek in False Creek that left 40 per cent of their units to the general public and then held a raffle for interested buyers.
“But you won’t get that anywhere else,” he added.
In general, buying into new developments is an exclusive club for the wealthy and well-connected, says Saretsky.
If it wasn’t hard enough, even finding a rental apartment in the building is a long-shot. However, at least four units at Telus Garden can now be found as short-term rentals on Airbnb.