Amped up activity from new construction buyers in Metro Vancouver reduced slightly during the first quarter of 2022, a trend that stemmed from higher borrowing costs, war and rising inflation.
In its Vancouver Multi-Family Take report for Q1-2022, Zonda Urban reported that early 2022 kicked off similar to the “torrid sales pace,” that was seen during the previous business quarter. For the first two months of the year, purchaser activity appeared to be on pace with 2021 levels even as COVID-19 cases increased and supply chain issues persisted.
“However, the combination of Russia following through with their devastating and unconscionable invasion of Ukraine, spiking inflation and the first Bank of Canada prime rate hike in more than three years reduced the froth in Metro Vancouver’s new condominium and townhome market to a simmer,” said the report.
Although sales volume softened by the end of Q1-2022, the number of transactions logged was still the fourth-highest quarterly total recorded since 2016. While investors and end-user buyers stayed active during the quarter, there was a “notable shift in buyer sentiment,” as urgency levels dropped toward the end of the quarter. Higher domestic inflation coupled with rising interest rates prompted some prospective buyers to reconsider their purchase plans.
“To date, the lower urgency levels and softening in demand have had little to no impact on pricing, other than for some developers to offer higher-valued incentives to attract purchasers,” explained Zonda’s report. “Given the current climate of rising construction and carrying costs, it is likely not possible for some developers to reduce prices without impacting the financial viability of a given project.”
Multi-family sales fell on quarterly and yearly basis
Between Q4-2021 and Q1-2022, new multi-family homes sales fell 17 per cent. Eight of Metro Vancouver’s 13 sub-markets recorded lower sales during Q1-2022. Compared to the same quarter a year ago, sales were down five per cent in Q1-2022.
The 6,323 sales that were recorded last quarter marks the second-highest quarterly sales total recorded in the past decade after Q1-2021. It also surpasses the 10-year average of first quarter sales by 55 per cent.
Sales for all Vancouver product types decreased between two to 45 per cent when compared to Q4-2021. New townhomes recorded the steepest drop in sales, which declined from 1,189 to 656 transactions from quarter-to-quarter. On a yearly basis, wood frame condo and townhome product dropped two and 68 per cent, while concrete condo sales rose 35 per cent yearly as “investor demand for this product type remained strong.”
Despite falling sales, over 70% of new product was absorbed
At the end of the first quarter, there were 44 new project launches and a 19 per cent yearly increase in
newly-released units.
There were 1,192 more sales than unsold units available to purchase in Metro Vancouver at the end of Q1-2022. The spread between quarterly sales and unsold inventory at the end of the quarter narrowed 34 per cent from Q4-2021 according to Zonda Urban.
“Despite the drop in sales it is evident that demand remained strong during the quarter as 71 per cent of new product released was absorbed,” noted the report.
Compared to Q4-2021, released and unsold inventory decreased 12 per cent. By the end of Q1-2022, there were 5,131 unsold new multi-family units available to purchase, down 12 per cent from Q4-2021 and a 27 per cent reduction from Q1-2021.
Inventory for all product types in the market decreased slightly during Q1-2022, especially concrete condos, which dropped 14 per cent.
Eight of the Metro Vancouver 13 sub-markets reported lower inventory levels at the end of Q1-2022. Burnaby/New Westminster recorded the largest jump in available inventory last quarter as a result of multiple new concrete condo project launches in Burnaby during Q1-2022.
All multi-family categories report price increases
Heightened imbalance between new home supply and market demand caused prices to increase in Q1-2022 across all product categories.
The overall average sale values sought for all product types grew nine per cent compared to Q4-2021, 22 per cent above Metro Vancouver’s five-year average. As of Q1-2022, the average gross price of newly launched concrete and wood frame condos is $858,491 and $642,491. New townhomes are now worth $1,266,826.
From Q4-2021, the average per square foot sale for concrete and wood frame condos grew five and six per cent while townhome values jumped 19 per cent.
“As a result of the pandemic affecting work/living environments, both end users and investors have continued to expand out towards the sub-urban markets, decreasing the price gap between the South and the North of Fraser for five consecutive quarters since Q1-2021,” stated the Zonda Urban report.
“The first quarter of 2022 recorded the greatest decrease of 21 per cent. The current aggressive increases on interest rates to balance out the inflation will cool off demand, but it is questionable to what extent it will affect the presale market,” it added.
