Vancouver’s Building Boom Continues Despite Weak Pre-Sales

Steve Saretsky -

The Greater Vancouver housing pipeline remains fully bloated surpassing 44,000 units under construction as of the end of June, a fresh record high. Despite the softness in the housing market with home sales hovering near two decade lows to start the year, developers are still jamming through new projects at a record pace. Year to date (as of the end of June), housing starts hit 15,723 units, that’s up 25% from the same period last year.

chart of housing construction
Units under construction Greater Vancouver

While these housing starts are likely to ease prices further, ultimately aiding in the battle of affordability, they still need to find willing buyers. Per data from MLA Canada and Urban Analytics, pre-sale activity remains weak. Perhaps even threatening the viability of some of these projects. In June, MLA reported the pre-sale absorption rate at 14%, the lowest count since MLA began tracking the data in January 2018.

pre sale absorption rate Vancouver
Metro Vancouver pre sale absorption rate drops to 14% in June.

Urban Analytics second quarter data shows the growing divergence between sales and unsold inventory.

Buyers of course are the real winners here as the abundance of options are being further incentivized through increased bonuses and decorating allowances from developers. However, it’s not just property developers who are vying for the attention of buyers, condo flippers too are facing increased competition. The number of active assignment listings for sale has been increasing at a steady pace since the end of 2017.

Assignment inventory vancouver
Assignment inventory for sale on the MLS in Greater Vancouver by month.

There is clearly a cyclical phenomenon for assignments and a correlation to building booms, the last of which we experienced leading up to the great recession in 2008.

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The Canadian Economy

Steve Saretsky -

Happy Monday Morning! We got a string of new data this past week confirming inflation in consumer goods, and housing are proving to be more than transitory. Canada’s consumer price index continued to drift higher with prices hitting an 18 year high, up 4.7% from last October. The recent floods in BC...

Steve Saretsky -

The calls for impending interest rate hikes continues. CIBC’s chief economist, Benjamin Tal, was out recently suggesting the Bank of Canada could hike its benchmark interest rate at least six times beginning in early 2022. “I think there is a risk of getting into the market at today’s rates,” noted Tal....

Steve Saretsky -

The BC Government announced it is looking at several cooling measures for the housing market in 2022. They have highlighted two measures. The first is an end to the blind bidding process, and the other is a mandatory “cooling off period” which will allow any buyer a 7 day recession...

Steve Saretsky -

The Bank of Canada continues to slowly drain liquidity after flooding the system with a firehose of cash during the pandemic. Bank of Canada governor Tiff Macklem announced the end of Canada’s QE program (also known as money printing). Furthermore, in Macklems words, “We expect to begin increasing our policy...

Steve Saretsky -

Consumer price inflation ripped higher in September, surging 4.4% year-over-year, the fastest pace of price increases in 18 years. Let’s discuss this further. We have an inflation problem and the Bank of Canada remains of the view that inflation will be transitory. Although they really can’t say otherwise, for if...

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The Saretsky Report. December 2022