After sales activity surged earlier this year, Metro Vancouver’s new multi-family transactions slowed during the third quarter due to a combination of buyer fatigue and fewer new project launches.
Zonda Urban’s Q3-2021 Vancouver Multi-Family Take, released today, shows a 16 per cent drop in sales from the second quarter. However, the total sales volume (5,481 units) was the highest Zonda Urban has ever recorded during a third quarter — exceeding the five-year and 10-year average by 48 per cent — and an 82 per cent increase year-over-year.
Fueled by a flurry of transactions during the first two quarters, Metro Vancouver has posted its highest year-to-date sales totals in the past decade, with 18,636 new condominium and townhome sales recorded by the end of the third quarter.
Those scorching sales figures, combined with less product entering the market, have swallowed up supply. There were 930 fewer unsold units available to purchase at the end of the third quarter than the previous quarter’s close. Adding to the supply issue, there were 25 fewer projects launched during the third quarter than the second quarter.
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“The lower supply levels have put increased pressure on pricing for all product types across the market,” the report stated, noting townhome prices increased by 10 percent during the third quarter while condominium prices rose approximately 1 per cent.
“While there are other economic factors affecting prices, the ongoing strong levels of demand relative to insufficient new supply has been the greatest influence on pricing.”
Condominium sales accounted for 83 percent of all new multi-family home transactions. Townhome projects lagged behind, with a 27 per cent drop in sales attributed to higher prices discouraging some buyers, as well as approval delays preventing new projects from replenishing the supply of available product.
The Surrey/North Delta sub-market saw the bulk of sales activity, accounting for 27 per cent of the region’s sales total with nearly 1,500 units sold, 7 per cent fewer than the second quarter.
South of Fraser sub-markets saw a 15 per cent drop from the previous quarter. However, third quarter sales totals were 82 per cent higher than the next highest third quarter tally since 2011, reflecting growing demand that continues to narrow price gaps between areas north and south of the Fraser River.
Looking ahead, Zonda anticipates that supply chain disruptions, inflation concerns and rising interest rates will increase costs for both developers and buyers, contributing to the supply crunch and driving prices higher moving forward.
“With inflation making the cost to bring new product to market ever-higher, thereby requiring higher sale prices, and the prospect of higher borrowing costs reducing purchasers’ buying power, Zonda Urban expects the supply of new product to remain limited or fall further,” the report said.
“Given the seeming unlikelihood that any significant measures or policy changes meant to increase the supply of both for-sale and rental product will be implemented in the short-term, investors anticipate supply pressures and therefore, price appreciation will continue.”