With the Greater Vancouver condo market having slowed considerably, sales for the month of September dropped 44% – a six year low, the effects are now trickling into the new development space. Pre sale centres for new developments are beginning to ramp up their incentives and trying to lure buyers with discounts, decorating bonuses, free upgrades, and even a years worth of mortgage payments.
Call it desperation, or call it a brilliant marketing strategy, ‘The Landing’ a pre sale condo development in Langley, has perhaps set a new precedent by offering to pay the first year worth of mortgage payments.
Just 12 months ago developers were having to contain the madness of crowds, many of whom were lining up overnight to secure a pre-sale contract. Today, incentives have become the new normal.
However, this should come as no surprise to market watchers who have witnessed the pressures of rising interest rates and tighter lending conditions. It’s a real estate cycle which is nearing its bitter end.
According to MLA Canada, the pre sale absorption rate for new developments fell to 38% in September, down from a high of 94% in January. Further, October is expected to be the busiest month for pre-sales in 2018 bringing over 2,000 units to market. This will place added pressure and competition between the re-sale market and the pre-sale market, both which are starved for buyers.
Recent data from CMHC and Central 1 Credit Union suggests the balance between new condos absorbed upon completion and left over inventory are beginning to trend in the opposite direction.
As the market shifts from a risk-off to a risk-on environment, developers have begun putting new projects on hold. The 12 month sum of housing starts across Metro Vancouver dipped to 26,565 units as per Stats Canada, down 4% from its recent peak in March 2018.
However, this slowdown is not exclusive to Vancouver. As global liquidity tightens, reports are growing of weaker buyer demand which is now plaguing real estate developers across the globe.
In Hong Kong, “Developers are rushing to unload their stock, as they are afraid the market will get even worse,” said Derek Chan, head of research at Ricacorp Properties. “Some projects, which have been priced lower, too have failed to get an enthusiastic reaction among buyers. Other developers will not dare to set prices as aggressively as they did before.”
In Australia, the Bureau of Statistics figures show Australia’s July building approvals figures are down -5.6% in seasonally adjusted figures, with apartments the worst hit, down -6.2%.