Real estate market analyst is calling attention to the plummeting condo and townhouse presales
For a while, BC’s condo market future was burning bright. Now, it would seem that the fire has been extinguished.
An ABC real estate market analyst is calling attention to the plummeting condo and townhouse presales. The feeling that something was happening was palpable but they had no idea what it was until they saw the figures.
This company compiled all of the figures for 2019 and the results were staggering. Totalling a 60% reduction in condo and townhouse units coming on the market. Following that figure, they focused on high rise construction and noted that the drop was even steeper, coming in at 76%.
Metro Vancouver, currently, is a bank of construction as far as the eye can see. However, that does not equate to the overwhelming decline of condo and townhouse sales. With some study, they found that the presale units typically take an estimated three years to reach completion.
The concern over the lack of new supply that was added to the market for 2019 will not be completed either in 2020 or possibly even 2021. These newly completed units may only become available in 2022.
Should we experience a shortage of newly completed units coming into the market along with an increase in demand between now and then, we could very well expect prices to increase sharply.
The drop in presales is incredibly concerning. Developers will almost always need to sell at least between 60-70% of their units before they begin applications for funding. It is a non-negotiable requirement from the bank in order for them to approve the funding, inspiring confidence that the units will sell and that that the investment is a sound one.
BC’s NDP government’s attempt to calm the frenzy of an overstimulated market, which saw home prices shoot the roof, resulted in the 2019 pre sales slump. The BC liberals state that the policies of the NDP have not really calmed the stormy waters, nor have these policies improved affordability. The domino effect would be catastrophic and the risk placed on the supply of these units would be far-reaching.
Many developers remain unsure of the supply as current condo and townhouse owners face surging tax increases that have been implemented, namely, school and speculation tax. They might adopt a wait-and-see attitude. If this proves unsuccessful, a move to surrounding areas where prospects seem significantly brighter might be on the cards.
However, there are those who say that with time, things will even out and that the general public could be in for quite a surprise.
BC’s NDP government is currently focused on all new available options and ideas that are coming to light. Additionally, they are in talks with the insurance companies in the hopes of finding a way forward. They have warned that this issue will not be resolved overnight and have come up with an interim solution. Provincial regulators are to do away with their nine-month window period, enabling these units to be fast-tracked to the market.