“Metro Vancouver’s new home market was negatively impacted by the recent government initiatives to slow down sales activity in the region,” according to the latest quarter Urban Development Institute State of the Market Q3 2016 report, compiled by real estate think tank Urban Analytics and released November 17.
Just over 3,000 new multi-family home sales were recorded in 2016’s third quarter, which is a decline of 34 per cent from the same quarter last year and a drop of 55 per cent from the six-year record set in 2016’s second quarter, said the report.
The figures run contrary to recent media reports suggesting that the new home market is bucking the downward trend seen in Metro Vancouver’s resale market. There have also been several press releases issued recently to media by developers citing recent presales successes.
“Some developments are doing really well, but there is an overall slowdown in the new home market,” Jon Bennest, principal at Urban Analytics and one of the report’s authors, confirmed to REW.ca. “There are a number of reasons for this, and the new foreign buyer tax is just one of them. In fact the market was already showing signs of cooling prior to the introduction of the foreign buyer’s tax.”
Broken down by property type, there were 1,763 new concrete condominium sales in Q3 2016, which is down 21 per cent compared with the same quarter last year. For new wood-framed condos, sales were down 44 per cent compared with the same quarter last year.
New townhomes told a similar story, with the 587 new townhome sales recorded in Metro Vancouver a drop of 28 per cent compared with Q3 2015.
Bennest said that one of the causes for some developments not doing so well was a “less sophisticated” developer failing to respond to changes in the market. He said that following the frantic second quarter where presale prices were breaking records at every new development, some developers in the third quarter were also attempting to set new record sale prices, and consequently overpricing their product – particularly in the Fraser Valley region, said Bennest.
As has been happening in the resale market, Bennest said, “Buyers have been stopping and taking a step back and saying, ‘Is this something I can afford, based on my income and down payment? What else is on the market?’”
The report added that “overall released and unsold inventory levels are still down 54 per cent compared to the same quarter last year.”
It said that currently, across Metro Vancouver, there are only 31 concrete condominium units, 19 new wood frame condos and 12 new townhome units that are completed and unsold.
Bennest suggested that the low standing inventory levels are another possible reason for the drop in sales in the third quarter – that a lack of available new home product has also caused buyers to put their plans on hold until more options are available.
“If you look at available inventory in the market, despite the slowdown in sales, it remains extremely low. As a buyer you may want to see what happens in the market.”
Bennest pointed out that, despite the overall slowdown, some developments have been selling extremely well, particularly in areas such as downtown Vancouver, Metrotown and Brentwood, where demand is still high.