DATE

new construction slows

Developers Pump the Brakes on New Construction

Steve Saretsky -

Permits & Housing Starts Plummeting in Vancouver

Despite rumours that new developments are flying off the shelf the numbers seem to paint a different picture. A recent report from Real Estate Weekly also shows new home sales are slowing similar to the resale market. It seems developers are being very cautious and holding off on starting new projects. Do the developers know something we don’t?

For the month of October Vancouver building permits were down 21.7% year over year. But more importantly, new home starts dropped 52%. Perhaps even more startling was that new home starts were 35% below the 10 year average for October.

housing starts Vancouver
October housing starts in Vancouver

The slowdown doesn’t stop with Vancouver. Residential construction across BC plummeted. New home starts dropped 25% year over year. Yet permits were only down 1.6%. Does this imply that despite projects being given the green light developers are choosing a wait and see approach?

The writing is on the wall. New construction sales are plummeting along with new construction starts. Recent stats from Urban Development Institute show concrete condo sales are down 21% year over year, while wood frame condo sales are down 44%. New townhouse sales also sunk by 28%.

new concrete condo sales
New concrete condo sales fall 21%

Buyers appear hesitant to lock in expensive pre sale prices with the uncertain future surrounding Vancouver real estate. To add to that, pre sale buyers would have to get re-approved for a mortgage when their new home completes a year or two down the road. Likely meaning higher mortgage rates than what they see today.

As I mentioned in my post The Canadian Economy’s Unhealthy Addiction to Real Estate, residential real estate construction makes up 7% of the entire Canadian GDP, higher than the United States back in 2007. A continued slow down in new construction will affect more than just jobs.

Get my best work sent to your inbox here.

 

Join the Monday Newsletter

Every Monday morning you'll receive a short and entertaining round-up of news on the Vancouver & Canadian Real Estate markets.

"*" indicates required fields

The Canadian Economy

Steve Saretsky -

Happy Monday Morning! We got a string of new data this past week confirming inflation in consumer goods, and housing are proving to be more than transitory. Canada’s consumer price index continued to drift higher with prices hitting an 18 year high, up 4.7% from last October. The recent floods in BC...

Steve Saretsky -

The calls for impending interest rate hikes continues. CIBC’s chief economist, Benjamin Tal, was out recently suggesting the Bank of Canada could hike its benchmark interest rate at least six times beginning in early 2022. “I think there is a risk of getting into the market at today’s rates,” noted Tal....

Steve Saretsky -

The BC Government announced it is looking at several cooling measures for the housing market in 2022. They have highlighted two measures. The first is an end to the blind bidding process, and the other is a mandatory “cooling off period” which will allow any buyer a 7 day recession...

Steve Saretsky -

The Bank of Canada continues to slowly drain liquidity after flooding the system with a firehose of cash during the pandemic. Bank of Canada governor Tiff Macklem announced the end of Canada’s QE program (also known as money printing). Furthermore, in Macklems words, “We expect to begin increasing our policy...

Steve Saretsky -

Consumer price inflation ripped higher in September, surging 4.4% year-over-year, the fastest pace of price increases in 18 years. Let’s discuss this further. We have an inflation problem and the Bank of Canada remains of the view that inflation will be transitory. Although they really can’t say otherwise, for if...

Get the Saretsky Report to your email every month

The Saretsky Report. December 2022