A developer is blaming the rising interest rates - among other things - for putting the brakes on a 400-unit condo project in the centre of Richmond.
Pre-sale buyers of Minoru Square were told this week the developer has “paused” the project and will return their 20 per cent deposit.
Minoru Square, being built by Thind Properties at Minoru Boulevard and Lansdowne Road, was due to be an 11-floor, residential development with more than 400 units.
The development included studio suites starting at $534,900 to two bedrooms and a den from $839,900.
Introduced to the market last year, the development was set to complete in 2025.
“Due to unforeseen circumstances, rising interest rates, and development challenges, we have made the hard decision to pause the project at this time,” wrote Thind in a letter to the buyers on May 26.
The company said it will work with the City of Richmond to “make changes to the design, residential and commercial make-up of the development.”
But in the meantime, current buyers will lose the unit and instead get their deposit back - 20 per cent of the condo price - starting next week.
Daniel Chen, a Vancouver realtor whose client bought a pre-sale unit at Minoru Square six months ago, told the Richmond News they were very surprised to receive the letter.
“They didn’t provide a solid reason. You can’t just cancel a project because you need to redesign the development. This should be something that was taken into consideration before the project hit the market,” said Chen.
He said buyers and developers have an unequal relationship in situations like this - buyers cannot walk away from a contract but a developer can end it without giving a solid reason or being held accountable.
“But it’s good that they are returning the deposit and informed us without more delays. It could be worse,” he said.
Chen is looking for a new home for his client, who now “only considers completed projects.”
Professor: Pre-sale is not for everyone
Thomas Davidoff, a real estate professor at the University of British Columbia, said a developer might cancel the project if they decide it is no longer profitable enough in today’s interest rate and cost environment.
“Maybe they hoped interest rates would come down faster…I would imagine they’re gonna ask the city for more density so it makes economic sense to build. That’s my guess,” said Davidoff.
He added that pre-sale is a high-risk investment, more so in the current environment when interest rates and construction costs stay high.
“We’ve seen other pre-sales run into trouble, and I don’t think this will be the last,” he said.
Most buyers, according to Davidoff, “probably shouldn’t be in the ocean with the sharks of pre-sale,” because it is for more sophisticated investors with high-risk tolerance.
And for an average buyer looking to buy a home, buying an existing home will minimize the risks, he added.
The News has reached out to Thind Properties but has yet to receive a reply.