Condo sales have taken a big hit in Metro Vancouver and Fraser Valley as buyers battle higher borrowing costs.
There were 10,075 apartments were sold in Metro Vancouver between January and August of 2023, down 17 per cent from the 12,159 units sold during the same period in 2022, according to an Oct. 3 report from Re/Max Canada.
Sales decreased by roughly 10 per cent in the Fraser Valley to just over 3,400 units during the same time period. Abbotsford was the only market to report an increase: four per cent.
Prices increased in nearly half of Metro Vancouver markets between January and August when compared with the same time last year, while prices in the Fraser Valley went down by single digits.
“The cost of living is out of control in larger centres and even the most affordable housing now carries a pretty substantial sticker price,” said Christopher Alexander, president of Re/Max Canada, in the report.
“Earnings have not kept pace with housing costs and inflation continues to stretch household budgets thin.”
Condominium demand across Canada is a “mixed bag of results,” with recent inflation numbers dampening buying activity, Alexander said.
Sales fell in all markets across the country except for Calgary and Edmonton in the first eight months of 2023, according to the report.
“Higher borrowing costs combined with the minimum qualifying rate of two per cent added by the stress test contributed to lower condominium market share in three of the seven markets, including Greater Vancouver, Fraser Valley and Ottawa,” said the report.
The average price for a condominium in Metro Vancouver was $815,494 between January and August 2023, up 1.6 per cent from $802,472 the same time last year.
Fraser Valley prices declined by 6.6 per cent from $583,662 to $545,344 during the same period.
Tim Hill, a real estate agent at Re/Max All Points Realty in New Westminster, said that it is important to note the one-year difference in prices.
While prices in Metro Vancouver seemed steady compared with the year before, there was a dip in condominium prices from April to May 2022. Prices fell from $844,700 to $779,700 between these two months, before going down further in the fall and winter to $713,700 in December.
“Because they did it year over year, it almost gets forgotten that the fall of last year and the summer of last year were down markets,” Hill said.
A condo unit will sell within a “reasonable” time frame if priced appropriately, according to Hill. He will be watching sub-markets like Langley and Port Moody, which are listed in the report as being popular for buyers who are searching for units below $600,000.
“The bank of mom and dad, once a serious driver in homebuying activity, has dried up in today’s higher interest rate environment. For some would-be buyers, once they consider the closing costs, including the down payment and associated taxes, the upfront cost of homeownership is simply too expensive,” the report said.
There are opportunities for more supply as pre-sales near completion with some of these units being re-sold by the original buyers, according to the report. These units are dubbed assignments.
Some assignments are tied to sellers who bought a pre-sale and never intended to live in the unit but would rather sell it off and make a profit.
On the other hand, some buyers have been put in the position of not being able to close on a pre-sale. These assignments are typically sold at a discounted price, according to the report.
“Now if you are unable to close because of interest rates, for example, you’re almost forced to assign. So, I feel like there’s just some opportunity there,” Hill said, adding there are more assignments coming on to the market than there were six months ago.
The report predicts condominium sales will slow down in most major centres in the coming months.
“Looking forward a lot of our markets are going to depend on what the Bank of Canada does and what the bond yields do to fixed rates,” Hill said.