Over the past few years the new development space has flourished. On the backs of an impressive housing boom, developers have been hitting record sales numbers, and sky high prices. However, amidst the changing market conditions in Greater Vancouver, which have pushed sales and prices lower in recent months, the new development space could be in for a bumpy ride.
According to research firm Urban Analytics, which gathers data directly from builders, developers and their marketing agencies, from January through September new multi-family dwelling sales in Metro Vancouver declined by 14% compared to the same nine-month period in 2017.
Altus Group, a development research firm, has come to a similar conclusion noting the year to date decline in new construction sales for both the single family and multi family housing markets.
Despite the decline, sales remain above the historical average, although its the shift in direction which should raise concerns. The ensuing slowdown has resulted in a growing number of unsold inventory, to which Urban Analytics notes there were 4,478 unsold units in Metro Vancouver last quarter. Year to date, new condo inventory has jumped to 3.9 months of inventory, an increase from 2.5 for the same period a year ago.
This has prompted home builders to slow the rate of construction, where the pace of housing starts ultimately peaked in the Spring of 2018. However, there remains a record high of nearly 45,000 units under construction. Upon completion, many of these units will add to the re-sale inventory supply. The re-sale inventory has also been increasing, up 35% year over year in October across all property types in Greater Vancouver. The highest since October 2014.
Urban Analytics estimates prices are off 5 to 15 percent from the market’s peak roughly around the beginning of the year, depending on the housing type and location. As a result, developers are increasing buyer incentives and will likely continue to do so.