Photo: Mike Benna/Unsplash
Resale condo prices in Vancouver have been steadily declining to better align with weaker market conditions seen through 2019. In the new construction condo market? Not so much.
This lack of response to the changing market on the new construction side has led to a widening of the price gap between resale and new condos across most submarkets in the Vancouver region, according to data published by real estate data tracker Urban Analytics last week.
The firm notes that the price spread during strong sales periods for new construction and resale condos is typically narrow.
“However, when market conditions soften as they did for the majority of 2019, this spread
tends to grow as the resale market can react much more quickly to lower demand levels than the new home market,” wrote firm analysts in a fourth-quarter Metro Vancouver report titled 2019 – Transition Year.
The chart below created by Urban Analytics shows just how wide the gap has become in some submarkets in the final months of 2019, with downtown Vancouver and the western section of the city seeing the most significant spreads materializing.
Since new construction condo buildings cannot react as quickly to shifting market conditions, Urban Analytics believes the gap will shrink as new projects are launched at lower prices in the coming year. Last year was marked by a multi-year low in new condo launches, so many units currently sitting on the market were launched closer to the peak of the market and are priced accordingly.
While more condo developments are expected to launch in the first half of 2020 compared to the same period last year, projects that have already spent months on the market will likely continue to struggle. This is due, in part, to an ongoing decline in investor interest in the Vancouver condo pre-sale market as prices look destined to sag.
“Investors are not being enticed to risk their capital and have it tied up in a project for several years,” wrote Vancouver realtor Steve Saretsky in a blog post published last week.
“The simple answer would be to just drop their prices, although in many cases that makes projects unfeasible. Meanwhile, municipalities are showing no desire to lower community contributions and various development fees to keep projects from being delayed,” Saretsky continued.
