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Unsold Inventory Growing Across Metro Vancouver Sales Centres

Steve Saretsky -

With Greater Vancouver condo prices declining, now down 5.9% year-over-year in March, this is having an immediate impact on the pre-sale market. As has been widely reported, developers are having to ramp up incentives, including decorating allowances, Realtor bonuses, and a full year of free avocado toast.

This should not be surprising given the pre-sale absorption rate fell to 15% in February, down from a cycle high of 94% set in January 2018. Long gone are the days of packed sales centres with lineups of frenzied buyers.

Today buyers have plenty to choose from as sales drop to an 18 year low in the resale market. Given the deteriorating outlook for the Vancouver housing market, buyers are becoming increasingly more cautious about locking in their money on an unfinished pre-sale unit. This has sent unsold inventory surging across Metro Vancouver concrete condo construction, up 184% year-over-year in Q1 2019.

Inventory levels
Sold & Unsold inventory for concrete condos across Metro Vancouver.

This has finally pushed pre-sale concrete condo prices lower, taking their first quarterly decline since Q2 2014.

new condo prices in Vancouver
Average price per square foot for Concrete condos in Metro Vancouver.

Developers are facing difficult times as they navigate the shifting landscape, with increasing risks that some existing buyers may simply walk away from contractual obligations. These risks have been heightened through lower prices, tighter financing, and an illiquid assignment market which has seen new monthly listings growing at levels we haven’t seen in over a decade.

Assignments in Vancouver
New Assignment listings by month across Metro Vancouver

 

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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...

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The Saretsky Report. December 2022