It’s been a long time coming. It appears the Vancouver condo market has finally surrendered to a plethora of market forces, the noticeable downwards shift in the month of September has it following the historically quiet detached housing market.
Following a sluggish summer, there was much hope the Vancouver condo market would rebound in September. However, Vancouver condo sales dropped 22% from August to September. The decline was even more pronounced when comparing on a year-over-year basis, sales plunged 43% from September 2017. It was the fewest sales since September 2012.
With sales just 3% higher than September 2008, when the global financial system was completely falling apart, the slowdown this year comes amidst relatively healthy and stable economic conditions. Unemployment across BC is near record lows, while wage growth and population growth remain rampant. Interest rates, although rising, are still negative in real terms. This certainly begs the question about future vulnerabilities considering unemployment has almost nowhere to go but up, economic growth is slowing, and the Bank of Canada seems determined to push interest rates higher.
The recent weakness in sales has now pushed inventory considerably higher. Condo inventory in the city of Vancouver jumped 73% from a year ago. While inventory still remains low from a historical context, a few more months of weak sales will likely push inventory to levels last seen in 2014.
With a record high 42,000 units under construction and over 30,000 housing starts having just broken ground, inventory will almost certainly push much higher.
Meanwhile, as sales stagnate, the average days on market ticked upwards by 21%, sale prices are succumbing to gravity. The average sales price of a Vancouver condo now sits at $867,903 down 0.6% from a year ago. The median sales price shows a decline of 1.3% to $698,500.
With the Canada 5 year bond yield printing a seven year high earlier this week, and the Bank of Canada slated for another rate hike later this month, one could certainly expect more downwards pressure on the Vancouver condo market.