What’s next in Metro Van. for the new multi-family home

Did you know that most pre-sales are not listed on the MLS? Thus, a report entitled The Fifth Dimension is a rare and free source of information to the public that fills the gaps the MLS leaves behind.

The report is produced by Fifth Avenue Real Estate Marketing, a residential real estate sales and marketing company with 39 years of experience in Metro Vancouver. The mid-year edition of the report features an assessment of the year to date and includes a forecast into the following year.

Readers will note that the first half-year total with respect to sales is arguably the lowest in more than a decade. Last time around, the trigger for this was the global recession of 2008. Despite the low volume of sales and the negative media portrayal, this is far from 2008.

Yes, prices have fallen over the past year, and sales volumes followed suit. However, there are re-sale and pre-sale area exceptions to the trend (namely Abbotsford and North Delta), where condominium products can still be offered priced between $300,000 and $500,000, and where new townhomes are being offered between $500,000 and $625,000.So, this time around, the more suburban markets are out-performing the more central and less affordable areas within the Metro market. This was not the case in 2008, where all types of buyers fled the outlying areas to snap up lower values in these central areas. Even with recent price reductions in these central areas, the prices offered today are still approximately 40 to 60 per cent more than in 2009/2010. It is also highly unlikely to see re-sale or new highrise or lowrise product in Vancouver West or downtown offered for less than $1,000 per sq. ft.

Despite the negative buzz about the market, the investor remains very active in these suburban areas today. Increased first-time buyer and downsizer activity this fall through 2020 is also anticipated. The new federal government program to aid buyers is likely to be most impactful on the suburban markets as will the recent easing of the qualifying rate with respect to the stress test. Further positive government initiatives are also anticipated, as it is an election year.

Simply put, demand still exists in the market, unlike in 2008. However, developers uncertain with respect to costs and achievable pricing are opting to defer releasing product until the market absorbs its current listings. Thus, the primary reason of late for the decline in sales year-over-year and quarter-over-quarter is restricted supply. In contrast, the re-sale market is experiencing increased supply and increase in selling time. However, for the most part, there is less than six months of supply in each neighbourhood.

In addition, one of the reasons the market recovered more quickly from 2008 here than in other areas in the world pertained to the presence of population-growth-based demand. Another was a hard signal communicated by developers with respect to: a) restricting supply and b) lowering prices to the point that consumers understood the floor had been reached. We may very well be at this point this fall, and given the restricted supply, we could very well see improved sales volumes in the remainder of this year and through 2020. Thus, we anticipate accelerated absorptions in 2020 with price level stabilizing. As for the long term, major price escalation in Metro Vancouver in the next three to five years is not unforeseeable.

To receive The Fifth Dimension, visit: fifthave.ca/category/market-intelligence