A Higher Supply At A Time Of Falling Demand
A report from Global News on Canada. “The number of real estate sales in Greater Vancouver hit its lowest level since the year 2000, according to data from the Real Estate Board of Greater Vancouver. What’s more, condo prices dropped for the first time since January 2017. Vancouver realtor Steve Saretsky, who watches the condo market closely, said he’s not surprised to see condo prices start to falter amid tighter mortgage rules and a slew new B.C. taxes aimed at cooling the housing market. ‘The detached market has been correcting for two years now, and it really shouldn’t come as a surprise that the townhouse and condo market is now following suit,’ he said.”
“With detached home prices continuing to slide, Saretsky said many people who might have been pushed into the condo market for affordability reasons may be back in the market for a bigger property. ‘At some point, you have to look and say, ‘Why am I spending a million dollars on a two-bedroom condo?’ he said. ‘At some point it just doesn’t make sense.’ He said stalling condo prices at the high and low end of the market are also discouraging speculators, and their exit is, in turn, further reducing price pressures.”
From Toronto Storeys in Canada. “New condo activity has slowed down in Toronto and the GTA, but new condo construction is surging. In the first half of 2018, sales of 9,058 units were down 58 per cent from 2017 (21,316) and they were 13 per cent below the 10-year first-half average of 10,471 sales. Pre-construction buyers have become more cautious since the sharp spike in new condo prices last year and the recent slowdown in price appreciation for resale units.”
“Investors are key to new condo sales. The sales strongly depend upon their activity and interest in the market changes with the outlook for investment returns. Condo apartment construction starts in the GTA reached a record 7,981 units in Q2-2018. The total number of condo units under construction also hit a high of 63,903 units, of which 95 per cent were pre-sold. Construction was driven higher by a record number of new condo pre-sales in 2017.”
“New condo sales dropped by 56 per cent annually in Q2-2018 to 4,977 units as new project openings slowed and absorptions moderated to their longer-term average. Of the 5,759 units brought to market in pre-construction projects in Q2-2018, 56 per cent were pre-sold by quarter end, which compares to an 80 per cent opening absorption of the record 9,521 units launched in Q2-2017.”
“The average opening price for new launches in Q2-2018 was $835 per square foot, up 18 per cent year-over-year but down from the high of $954 per square foot for units launched in Q4-2017. Unsold inventory in development moved up to 9,341 units.”
From CBC News. “A lofty condo project planned for the edge of Westmount is now destined to be a seniors housing complex. Brokers say the change reflects the ongoing decline of condo sales in Edmonton. Bradley Gingerich, a senior VP at CBRE, said at a cost $1 to $2 million for a 2,000 sq. ft. unit, One Properties only sold a handful in two years. Chair of the Realtors Association of Edmonton, Darcy Torhjelm, said condo sales are down eight per cent from last year and vacancy is up more than 20 per cent.”
“‘They’re not able to sell them as quickly as they had anticipated when they first bought,’ Torhjelm said of the condo developers. ‘Because these things would be planned a couple of years ago.’ Gingerich said prospective homeowners have higher thresholds to meet to qualify for mortgages. ‘The new mortgage rules have really wiped out a large part of the buyers,’ he suggested.”
“Sales offices touting the once-coveted condominiums are boarded up and some, like the Vibe on 116th and 107th Avenue, are replaced with rental offices. Others have boarded up offices, temporarily abandoning plans to build towers in the core of the city. Lamb Development Corp. was successful in getting the lot at 10160 106th Street rezoned for a 37-storey Jasper House Condos 2015, only to put the project on hold two years later.”
“Brad Lamb, CEO of Lamb Development Corp. said they sold about one hundred one-bedroom units but the more expensive condos weren’t moving. Lamb isn’t giving up hope the condo market will recover in Edmonton but figures it may take a few years and a rebound of oil prices and consumer confidence. ‘All those things that make people want to buy stuff that cost a lot of money.’”
The Sydney Morning Herald in Australia. “House prices have fallen at their fastest rate in more than six years, fuelling concerns that prices in Sydney and Melbourne may fall ‘too far, too quickly,’ hurt economic growth and drive anxiety among policymakers. The market now predicts house prices could fall by more than 10 per cent in Sydney and Melbourne from their peak by the time the market stabilises in 2019. They have already been falling for 10 months straight.”
“Capital Economics chief economist Paul Dales said the most worrying aspect was that ‘prices will soon be falling at an even faster pace.’ ‘The further decline in the number of home sales in March to a seven-year low was larger than the fall in the number of new listings,’ he said.”
“He warned this was before the full effect of the banking royal commission was known. Banks have tightened their books in response to revelations at the commission, putting the financial system on a surer footing, but risking steeper price drops. Australian Prudential Regulation Authority chair Wayne Byres said in July that the ‘heavy lifting on lending standards has largely been done,’ but Mr Dales warned ‘there is still a big risk that the royal commission results in a further tightening in lending standards.’”
The Daily Telegraph on Australia. “Sydney rents have been falling at the fastest rate ever recorded following the release of a sudden glut of rental apartments in the Hills, Parramatta and other western regions. Figures released Wednesday showed the fall was not only the biggest since records began, but one of the few times tenants have ever benefited from an improvement in rental pricing. It is the first time CoreLogic has ever recorded a drop in Sydney rents on a citywide basis since they began tracking the market in 2008, according to head of research Tim Lawless. The group had recorded falls across individual regions, however.”
“‘There is a higher supply of rental housing at the moment, but it has come at a time of falling demand,’ Mr Lawless said.”
“Rents were falling the fastest in areas with a higher supply of new housing. This included the inner west, Hills district, Blacktown and Ryde. CoreLogic’s latest hedonic home value index also revealed these city regions recorded the sharpest falls in property prices over the past year. Dwelling prices in the Hills region dropped an average of 9.2 per cent, while inner west prices recorded the second biggest average fall at 8.8 per cent. This was followed by the Blacktown’s region 7.8 per cent price fall and the 7.7 per cent fall in Ryde regional prices.”