The correction in the Vancouver condo market is now fully underway after prices peaked at the beginning of 2018. This should really not come as a surprise given how weak the detached housing market has been for nearly 2 years, and considering the tightness in the mortgage lending space. As as a result, Vancouver condo sales fell to a 10 year low in December with sales plunging 47.5% year-over-year, the sharpest annual decline since 2008.
Unlike the detached housing market, price declines in the condo market are easier to quantify. Although once again price declines will vary depending on the metric used. Both the average and the median sales price declined on a year-over-year basis in December. Since prices peaked at the start of 2018 it is a fair assumption to suggest condo prices have dipped about 10%, even across entry-level one-bedroom units. It is important to remember that prices are seasonal with home prices typically decelerating in the winter months. However this should not be used to discount the significant deceleration in condo prices. The average price per square foot for resale condos now shows a 4.5% decline from December 2017.
An important catalyst for a continued decline, or perhaps an accelerated decline in condo prices will depend on inventory levels. Vancouver condo inventory increased 67% year-over-year in December, but remains below historical levels. Although there is currently 6.6 months of inventory which ultimately suggests a buyer’s market, this is ultimately a result of buyers moving to the sidelines not from a surge in new listings.
One catalyst for higher inventory in the new year will almost certainly come from the new construction space. As of November 2018, there are just over 40,000 units under construction in Greater Vancouver. A large portion of these units will complete this year after lengthy construction delays which should have seen them complete in 2018.