Intro: This is an important article and a critical piece of the puzzle regarding the real estate industry in Vancouver. Another aspect that CityHallWatch has pointed out is that realtors–often with direct affiliation with the developer and apparently even being coached on what to say–are often the only ones writing to City Council at public hearings to support massive tower developments (e.g., Marine Gardens, and 1755 West 14th). It is time to ban corporate and union donations in municipal politics. The Prime Minister is in Vancouver today for roundtable discussions on the housing crisis. Perhaps federal government authorities should look into this behavior of the development industry as well. Citizens may also wish to explore the idea that anything illegal may be occurring.
Implicated in this behaviour are Rennie Marketing Systems, Magnum Projects, and Cressey Developments. A separate story from 2012 suggests that Anthem and Beedie Living also engage in the practice of insider pre-selling to family/friends. Who else is doing it?
Below are excerpts/highlights of the the headline article. Please go directly to the Globe and Mail for the full article.
Vancouver developers shutting out regular buyers with insider condo sales
(by Kathy Tomlinson, The Globe and Mail, 17-June-2016)
- Major condo developers in Vancouver are shutting out average buyers by selling their most affordable new units privately – to clients of select realtors and “family and friends” – before their advertised sale dates, The Globe and Mail has learned.
- The typical sales contracts also allow those insiders to legally flip the units under construction (known as presale) before closing as long as the developer gets a cut from that transaction. Like shadow flipping with houses, flips of presale condos have been controversial in Vancouver. When supply is scarce and prices are escalating, flipping leaves buyers who want units to live in feeling ripped off or shut out.
- Several realtors told The Globe deals with insiders are widespread and quietly encouraged by developers. In Vancouver’s wildly expensive market, it is yet another obstacle for people who feel the deck is stacked against them.
- Mike Yeung would like to sell his small condo and buy a new one, but said he has encountered nothing but frustration. He said he worries some developers and realtors are withholding inventory from the public to drive up prices and profits.
- “At two presale events, I was there in person,” Mr. Yeung said. “Each time, I was informed that all the studio and all one-bedroom condos were already sold out … to the developer’s family and friends.” Eager buyers camp out in lineups for hours or days before the sales events. Thousands also sign up online to get “VIP” access, only to find out on opening day they had no chance. Several have said they were then invited to buy something more expensive. “It’s shady and not forthright,” Mr. Yeung said. “It’s a bait and switch – to get you in the door.”
- … Two developments were recently promoted by Rennie Marketing Systems, owned by Vancouver’s most politically connected condo marketer, Bob Rennie, an outspoken advocate for increasing supply to cool the market.
- Realtor Steve Saretsky contacted Rennie staff recently and said he was told most of the units in The Ellsworth, a new low-rise building in East Vancouver, have already gone to family and friends of the developer. When sales opened Monday at 8X on the Park, also marketed by Rennie, Mr. Saretsky said all the studio and one-bedroom units had been sold privately.
- … Rennie said developers advertise to the public as a sort of fallback policy. If the insiders who get first dibs do not buy enough units, they can sell what is left to the next tier of interested buyers.
- “Nobody knows whether the person saying they want the studio will take the studio,” Mr. Rennie said.
- Mr. Rennie said 3,500 people expressed interest in just 89 units at The Ellsworth, including the realtors and other insiders. As a result of The Globe’s inquiries, he said he now thinks all would-be-buyers should be told what they are up against.
- “From talking this through, I think once you get to a certain level of registrants, we should tell people,” Mr. Rennie said. “I am going to suggest that [to developer-clients].”
The article goes on to mention other prominent developers in Metro Vancouver: Magnum Projects, owned by George Wong, and Cressey (which built Kings Crossing in Burnaby, and confirmed that every one of the units in the first tower was sold privately to clients of select realtors, despite promotions to the public beforehand). What proportion of the frothy housing market is been propped up by these tactics of the most prominent developers, whose advertising accounts for a lot of the media advertising we see every day?
Closing comment by CityHallWatch: There are ethical and legal issued involved in these behaviours of the development industry. The Urban Development Industry, realtor associations should be looking into things and encouraging better behavior. And governments must not look the other way. They are expected to protect the public interest above all.