Vancouver Condo Report
Greater Vancouver Condo Market Overview
Latest Update: December 6, 2014

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Has the Vancouver condo market lost its Mojo?

New project starts are down, sales are down, planned marketing starts are down. So what’s up with the new condo market in Metro Vancouver? Contrary to the thinking of many developers, 2013 ain’t 2007 all over again. Off shore buyers with pockets bulging with cash aren’t flocking to this market anymore. A few high profile extraditions to China and better opportunities in the recovering US market have shifted attention away from the Metro Vancouver market. So as we’ve said before, “ Welcome to the new normal and get used to it."

An analysis of apartment condo marketing starts shows that the number of projects and units started during the first half of 2013 has dropped when compared to the same period in 2012. Based on MPC Intelligence TRAC data, 19 high rise and mid rise projects with 3,670 units started marketing between January and June, 2013. This down by 20% compared to the same period in 2012 when developers started marketing 26 projects with a total of 4,600 units. The decline in low rise marketing starts is even more dramatic; 18 projects with 1,020 units in the first half of 2013 compared to 34 projects with 2,400 units in 2012 - a 57% drop.

So maybe developers are just biding their time and plan to increase starts during the second half of the year? This would be a change from the pattern set over the past few years of launching most new projects during the first half of the year. And an analysis of a longer time period suggests that this isn't likely to happen.

Over the past 12 months, high rise developers have shifted their emphasis from Westside Vancouver, Burnaby and New Westminster to the suburban markets of Richmond, North Surrey and the Tri-Cities market. The net result has been an increase in more affordable product. The average asking price per unit (exc. GST) at the end of June was $485,590 or $584 per square foot compared to an average asking price of $515,480 or $617 per square foot 12 months previously. But this shift to suburban markets has also been accompanied by a slowdown in sales and an increase in unsold inventory in new projects.

At the end of June 2012, high rise projects that had started marketing during the previous 12 months were about 63% sold and had a total of 2,265 unsold units. One year later, high rise projects that started marketing during the 12 months prior to the end of June, 2013 were 47% sold, with a total of 3,465 unsold units.

Low rise marketing starts over the past 12 months are down in almost all markets. Compared to the previous 12 months period (July, 2011 to June, 2012), the biggest declines are in Richmond, the Tri-Cities market, North Surrey and Westside Vancouver. The only significant increase in low rise condo marketing starts over the past 12 months was in Abbotsford (market intelligence seems to have a hard time crossing the Langley-Abbotsford border).

Fewer low rise marketing starts should mean fewer sales but for low rise projects that started marketing during the past 12 months, it's also meant slower sales. At the end of June, 2013, low rise projects that had started marketing during the previous 12 months were 28% sold. Compare this to the low rise projects that started marketing between July, 2011 and June, 2012. These were 45% sold out at the end of June, 2012.

Unsold low rise inventory is certainly a drag on this market and has contributed to the slowdown in new projects. But price increases haven't helped either. At the end of June 2013, the average asking price in wood frame low rise projects that started marketing over the previous 12 months was $336,100 or $424 per square foot (exc. GST). Average asking price was down by about $10,000 from 12 months ago but price per square foot was up from $407. The squeeze on unit size can't have help sales, especially in the suburban markets.

So what are the options open to high rise and low rise developers planning new projects? Judging from sales rates for high rise projects that started marketing during the first half of 2013, projects in the City of Vancouver are still doing better than new projects in other markets. Controlling for project size and months on the market, standardized sales rates in City of Vancouver projects are about twice those of new projects in suburban markets.

An analysis of planned high rise projects shows that as of the end of June, high rise developers were planning to start about 2,800 units over the next six months. This would put total high rise starts for 2013 at 6,600 units, about 900 units less than started marketing in 2012. About 25% of the high rise marketing starts planned for the second half of 2013 are in Downtown Vancouver, with another 15% in Burnaby and 14% in Richmond.

Sales rates, controlling for project size and months on the market, tend to be slow for most new low rise projects that started marketing during the first half of 2013. A few projects stand out with better than average sales but sales during the initial marketing month are never a good sales indicator, especially in suburban markets. Hudson’s Lofts reported selling out within its first month of marketing but that’s not necessarily an endorsement for more shoe box housing in the Abbotsford market.

Low rise developers started marketing 1,020 units during the first half of 2013. Based on outstanding applications and developer intentions, an estimated 3,650 low rise units could start marketing in the second half of 2013. But given over 3,900 unsold low rise units and another 1,275 yet to be released units in projects now marketing, 3,650 low rise marketing starts sounds too ambitious even for lenders itching to bump their year-end bonuses.

For more market info contact MPC Intelligence
For information on improving project sales contact Strategics


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