There are a couple of ways to lower home prices, one of them is through flooding the market with supply. That’s certainly what they’ve done in New York. The borough has 7050 unsold, newly built units, according to a report. It would take 74 months — more than 6 years, to clear all of Manhattan’s unsold units at the current pace of sales.
The glut is a product of a post-recession construction boom aimed at globe-trotting investors, who now show little interest in collecting lavish Manhattan homes. Unsurprisingly, this has resulted in sellers being forced to slash prices. “The entire year was a struggle,” Olshan Realty President Donna Olshan said. “You had to lower your price by 10% before you can even find a buyer.” It’s believed prices will need to fall even further to get the market back on firm footing.
Now let’s turn our attention to Vancouver, where new data from CMHC shows annual housing starts just hit a record high in 2019. There were 28,141 new housing starts for the year, surpassing a previous record set back in 2016.
This is certainly encouraging news for those aspiring towards improved housing affordability. The pipeline of new supply, despite recent turbulence in the market, remains fully stocked.
There is evidence developers are getting stuck with new supply after completion. Here we can see the absorption rate for new homes falling down to 75% from a peak of 84% in November 2017. What this means is 25% of new homes remain for sale following the completion of construction.
This is certainly not an alarming number, however, if the absorption rate continues to fall it will leave developers with more unsold inventory, likely resulting in forced price reductions. As the old saying goes, supply and demand…