Vancouver condo sales did some catching up with the detached housing market in January. Condo sales fell sharply, dropping 42% year-over-year. This was the fewest monthly sales since January 2009.
As a result of the weak sales, inventory increased 81% year-over-year in the month of January. It is important to note however that overall inventory levels still remain historically low. With sales falling and likely to remain muted given the numerous headwinds that we will describe in detail below, it is likely that inventory will continue to grow as this housing cycle comes to an end. The sales act this ratio slipped to 12%, indicative of a buyer’s market. This was also highlighted in the months of inventory which climbed to 8.4, also indicative of a buyer’s market.
Inventory levels are likely to continue growing given the weak pace of sales and the record number of housing units under construction across Greater Vancouver. Many of these buyers are investors and not and users. A recent report from MLA Canada suggests 67% of pre sale condo buyers in the Burnaby area are investors and not end users. Therefore in the coming 12 to 24 months these units will be completing and will either be rented out or resold. If prices continue to slide there could be an increase in buyers walking away from their contractual obligations. There is currently an unknown but certainly significant number of condo assignment contracts up for sale. This has created shadow inventory which is not calculated in the Real Estate Board of Greater Vancouver’s inventory numbers. The assignment market is becoming increasingly illiquid as buyers have more to choose from and are shying away from the risks and the uncertainty of taking over an assignment contract.
All of the conditions above have resulted in condo prices declining. As per the official home price index, Vancouver condos fell 3.4% year-over-year in January. Prices have fallen 7.3% in the past eight months.