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‘Don’t always go up’: Bulk of Metro Vancouver presale condos sold in 2022 and 2023 now appraised below original price

ByStan S.

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THE BUTTERFLY PRESALE CONDO
Thousands of presale buyers in Metro Vancouver face completing their purchase of condos that are now worth less than they were in 2022 and 2023 when they signed the contracts to buy them.
More than half of the appraisals required by mortgage lenders to complete sales are now coming in at values lower than original sale prices.

As a result, lenders will only write smaller mortgages. That means condo buyers have to satisfy lenders by ponying up the difference between the unit’s value in 2022 or 2023 and what it is worth now, either by putting in more cash or refinancing.

A Vancouver appraiser who works with banks, law firms and mortgage brokers is raising the alarm because the buildings are now built and developers are trying to finalize sales.

“Presales don’t always go up. There was that mindset where if it happened before, it’s going to happen again,” said Adam Lawrenson, owner of Vancouver-based Adlaw Appraisals. “I can’t say an exact number, but over half (of appraisals) are now coming in below their sale price.”

He estimates condo values have dropped between five and 20 per cent below what buyers originally promised to pay when they put down a non-refundable deposit.

That’s one reason why a growing number of buyers are looking to sell these new or barely used properties. This market glut and a lack of demand is helping drive down prices.

“You can easily get a brand new unit or a one- or two-year (old) unit at a cheaper price point than these presales, so that comes into play when we are doing our appraisal and looking at current market values.”

With sellers dropping prices to speed up sales, that sets a new base for future, lower, appraisals.

No area in the Lower Mainland is immune, but there are some buildings and areas that are more susceptible to having units “being underwater.”

There are “areas of Langley that got overbuilt and developers were leaving them vacant for six to 12 months, in hopes the market would turn around. But you can only hold for so long before you have to start selling them,” Lawrenson said.

There are also a few buildings in North Burnaby where presale buyers are now looking to get rid of units as soon as they close their sale. Some have 30 listings of one-bedroom apartments.

There are also some higher-end buildings in downtown Vancouver, such as The Butterfly on Nelson Street, with presale units that sold at presale for over $2 million. Some of these have appraisals that are now down $300,000 to $500,000 from their original prices, said Lawrenson.

According to research by Rennie Intelligence, which does marketing for major developers, investors made up around half of all buyers in the years between 2021 to 2023.

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