Vancouver’s condo market continued its downwards trend in the month of October. This should generally come as no surprise considering Real Estate markets are incredibly slow moving and are highly dependant on the availability of mortgage credit. In other words, this trend is likely to remain in place for the foreseeable future unless we see a shift in either domestic credit, (mortgage credit growth is currently at its weakest pace of growth in 18 years), or we see large capital outflows from China. This seems unlikely given their need to maintain capital reserves in order to fight a trade war and growing economic instability and slowing real estate market.
These two trends help explain why Vancouver condo sales fell 28% year over year to their lowest total since October 2012.
As a result of weaker than usual condo sales, listings are beginning to stagnate. This has allowed inventory to build rather quickly, jumping 74% from the same month last year. While historically condo inventory remains low, this trend should certainly put sellers on notice.
As is typical in all real estate markets, sales volumes lead prices. This is generally a result of market exhaustion and an adjustment phase were both sellers and buyers hold out, with sellers trying to maintain current prices and buyers holding out anticipating future price declines. Sales volumes in Vancouver’s condo market ultimately peaked out in the spring of 2016, it is only now where are seeing some movement on prices.
The average sold price per square foot peaked in January at $1124/sq ft and has now dipped to $1016. While there is no perfect measure to gauge price movements, both the average and median sales price are also showing declines from their peaks earlier this year.
With the Bank of Canada determined to hike interest rates towards their neutral rate of 2.5-3.5% this will further chip away at local borrowing capacity. As a result, developers are proceeding with caution, and have begun slowing new housing starts. Despite this, there remains a record pipeline of new inventory coming to market over the next 1-2 years.