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