Completed new townhome and condo supply has “fallen off a cliff,” says report, but cumulative deficit of starts vs demand growth made that inevitable
Making local headlines earlier this week, including our own, was a report by the Urban Development Institute that found the number of move-in-ready new townhomes and condos in Metro Vancouver has plummeted recently, with not one new, finished townhouse available for sale in Vancouver proper in Q1 2017.
It’s an alarming statistic, and the graphs that accompany the report do indeed show a cliff-like dive for townhomes, concrete condos and wood-framed condos across the three identified Metro regions. Most show single-digit availability, compared with hundreds of units a couple of years ago.
Still, these stats are for finished new homes only – those that did not sell prior to completion. And as we all know, with the demand for real estate as hot as it is, most new developments sell out way before they are completed. So perhaps not a big surprise, then, that what they called “standing inventory” is at historic lows.
With that in mind, what about total inventory – the supply of all new homes released for sale, including those under construction or in the planning stages? Here’s where it gets perhaps a little less headline-grabbing, but more interesting when you start to delve deep.
According to the UDI report, total inventory is also way down compared with a couple of years ago.
Available new concrete condos in Q1 totalled 1437 units across the whole of Metro Vancouver – a 30% decline since the same quarter last year and a 71% decline from Q1 2015. For wood-framed condos, the same respective declines are 34% and 79%, now at fewer than 400 units.
And if you’re looking for a new townhome, well, you’re certainly in better luck this spring than a year ago, when for some reason, new townhomes plummeted to almost nothing. But don’t be fooled by the 168% increase this year – it’s a start, sure, but we’re still far below the levels that we’re used to, by about half.
So how can this be, when we have all read the headlines about how multi-family construction is at record highs?
Simple. Even if you increase the pace of construction, you will run out of new homes pretty quick if that growth is not as rapid as the increase in demand. And that’s what has happened here.
New home developments are selling out quicker and quicker – whether to locals or overseas investors, we don’t know. The UDI has the average proportion of foreign buyers at around 7%; whereas I’ve heard one UBC professor cited who claims up to 90% of new condo units are being snapped up by foreign speculators before they are marketed to locals. Or it could be anywhere in between.
One solid fact the UDI is able to reveal, though, is the cumulative deficit of new homes that is being created by population growth. If you’re interested to see what I mean, check out their eye-opening graph that overlays the increase in Metro Vancouver’s population and the number of housing starts. Both have risen, but overall, population increase has risen more rapidly. Which means we’re not building enough housing for all the people. I mean, that’s just math.
However, critics argue – and they may be right – that any additional housing you build will just be snapped up by more and more overseas investors. That you simply can’t outbuild demand.
I was interested to hear what a local real estate agent, Steve Saretsky, said in response to the UDI report on Global BC. He agreed that more must be built, but added that it was time to intervene in how new projects are marketed, with local buyers getting first refusal on units before they can be sold to overseas buyers (or, I would add, to friends and family of the developer). I think this could work, with careful thought as to the guidelines. Our local housing needs would be better met and developers would still get to sell out their projects by marketing any remaining units overseas.
One local developer, Westbank, recently took this approach (at West Vancouver council’s behest) at its waterfront condo project Horseshoe Bay. Sure, these are luxury units, but it’s important to build more of those too (as well as lots more at the middle and lower end). Westbank’s “locals first” initiative seemed to be a good solution, as local single-family home owners were offered somewhere luxurious that was worth downsizing into, freeing up their pricey detached homes.
And widely freeing up our region’s detached homes, whether for sale or for redevelopment into smaller homes, is essential. With 800,000 empty bedrooms caused largely by lack of supply of smaller homes for their owners to move into, and families in cramped accommodations needing 120,000 bedrooms, we have to get locals moving into homes that are the right size for their needs.