Metro Vancouver has just experienced the largest quarterly presale inventory release since mid-2022, according to a recent report by real estate sales and marketing firm MLA Canada. The second quarter of 2024 saw a significant influx of new units hitting the market, with varied absorption trends across the region.
In Q2 2024, around 5,850 units were released: 1,600 in April, 2,000 in May, and 2,250 in June. This surpasses the supply release of over 3,000 units in October 2023 and is comparable to Q2 2022, which saw approximately 5,900 units released.
However, despite this surge in inventory, sales velocity in the presales market has been slow. Demand, as measured by the number of units sold and same-month absorptions, was higher in previous quarters than in Q2 2024. MLA Canada notes that while same-month absorptions were notably high at the start of the year, fueled by projects that had been previewing for months, absorption rates began to decline by May and June. This decline can be partly attributed to the seasonal shift from the active Spring market to the slower Summer months.
Overall, in the first half of 2024, the Lower Mainland saw an average same-month absorption rate of 33%, with 2,848 units sold out of 8,593 released units across 68 projects. Interestingly, the Fraser Valley outperformed the Greater Vancouver region, with more units sold (1,631 out of 4,546) and released than Greater Vancouver (1,217 out of 4,047). The Fraser Valley’s higher sales-to-listings ratio, at around 36%, compared to Greater Vancouver’s 30%, is largely due to its more competitively priced offerings.
Due to reduced sales velocity, developers are extending the length of sales campaigns, and sales teams are no longer seeing towers sell out within weeks of launch. This has led to increased competition among developers, resulting in more options and incentives for prospective buyers.
Looking ahead, MLA Canada projects 10,500 units across 42 more launches in the second half of the year, with an average same-month absorption rate of 35%. Although this level of activity is an improvement from 2023, it remains below historical norms and is expected to align with slower years.
“Presale buyer urgency is low, and almost every deal involves negotiations, especially at the higher end of the pricing spectrum,” said MLA Canada’s Director of Advisory Garde MacDonald. “We foresee that the remainder of the year will build on existing trends. While we anticipate a seasonal upswing in the Fall, the market outlook for H2 2024 does not look markedly different from today.”
The signs of distress are everywhere. Many of Vancouver’s priciest condos are being offered at big discounts.
One downtown condo that was bought for almost $3 million is now on the market for $2.3 million. At the elite, funky Alberni, designed by starchitect Kengo Kuma, an “extremely high” inventory of 26 condos is for sale, says realtor David Hutchinson. At the similarly over-the-top Hotel Georgia, 14 units are listed. The 48th-floor penthouse was once put on sale at $35.8 million, now it’s going for $20.8 million. In the neo-futurist Vancouver House, where Hutchinson says even storage lockers have sold for $150,000, more than 30 opulent apartments are up for grabs. There have only been three sales in six months, and those are smaller units going at about 10 per cent below list price.
This inflated inventory coincides with a residential highrise construction boom in Metro Vancouver, including glamorous Westbank condos about to be finished at Oakridge Park and in downtown’s sky-high Butterfly. This isn’t to mention thousands more coming on stream in new highrise clusters in Burnaby and beyond.
Many of these condos have been aimed at the international market. Analysts point to globalization, particularly the trans-national effects of China’s depressed housing sector. China’s massive housing market is bursting after an incredible bubble. As Vancouver’s Steve Saretsky says, there has been a drastic drop in what was once an “unprecedented Chinese appetite to take capital out of the reach of the Chinese government” — mostly by investing in Western real estate.
There is no doubt values in Vancouver and Toronto, which are among the world’s most unaffordable cities, were impacted dramatically by what economists dub “China shock.” The B.C. Business Council’s David Williams and former Simon Fraser University professor Josh Gordon showed how the volume of money pouring out of China into real estate into Australia and Canada jumped by up to six times between 2016 and 2019.
David Ley, University of B.C. geography professor emeritus, describes how a decade ago large Vancouver property developers opened scores of sales offices in East Asia to serve business-class immigrants and other affluent transnationals.
At the time, the director of marketing at Westbank, Michael Braun, said: “China is now a big part of this business … right now I have a rule when we talk about projects: If the Chinese market doesn’t want it, I have no interest in it.”
Even though developers of both high- and medium-end Vancouver condos continue to market in East Asia, distributing most of their advertising in both English and Chinese languages, there are strong signs “China shock” is easing, becoming unpredictable.
As Saretsky notes, the overall price of homes in Greater Vancouver is down by just 3.6 per cent compared with two years ago (and by 7.5 per cent less in Greater Toronto). Values would be lower if not for rapid population growth through international migration. Nevertheless, Saretsky says the pounding on luxury condos is intense.
“Globalization is now reversing,” says Saretsky. “What happens if further Chinese wealth destruction necessitates Chinese liquidation of foreign housing ownership?”
Michael Peregrine of Santiago Capital says that over the last 10 years China’s property market has “fallen precipitously.” And there is “more downside to come.”
The problem has been that many real estate companies in English-speaking countries integrated East Asia’s housing boom into their profit dreams.
“The higher Chinese property prices went (valued at US$50 trillion), the more wealth was generated that could then be invested in other property markets around the world,” Peregrine writes in a 50-page report.
“The Chinese property juggernaut (bought) massive foreign housing inventory at inflated prices,” says Peregrine. “It forced locals to pay up in their own markets to compete against Chinese investors.”
Now China’s boom, which was fueled by debt, is unwinding.
“Canada will be at the forefront of Chinese selling,” Peregrine says, particularly since both the federal and provincial governments have been instituting various forms of foreign buyer restrictions and vacancy taxes, albeit with loopholes.
“Toronto condo sales,” Peregrine says, “are already down 85 per cent from their peak volume in 2022.”
Analyst John Pasalis adds that this June a record number of Toronto condos are for sale.
All this financial destruction, however, doesn’t mean the river of money from China has dried up completely. China still has by far the world’s highest number of millionaires trying to get their wealth out, with Canada showing up as the fourth most desired country for international multimillionaires ready to pay for a so-called “golden passport.”
The Canadian condo scene now comes with trans-Pacific turbulence. Hutchinson says many of the scores of pricey condos now on the Vancouver market were originally “sold in presentation centres offshore.” Most were snapped up as pre-sales designed for flipping. Now many speculators are in a bind.
While their financial pain might end up going deep, there is a chance others could benefit, with a possible trickle-down effect on prices.
Still, in Metro Vancouver we’ve learned not to hold out too much hope for real affordability.
VANCOUVER, BC – July 3, 2024– Home sales in Metro Vancouver registered on the MLS® remained below seasonal and historical averages in June. Reduced competition among buyers has led to an accumulation of inventory levels not seen since the spring of 2019.
The Greater Vancouver REALTORS® (GVR) reported that residential sales in the region totaled 2,418 in June 2024, marking a 19.1% decrease from the 2,988 sales recorded in June 2023. This figure is 23.6% below the 10-year seasonal average of 3,166.
“The June data continued a trend we’ve been observing where buyers seem hesitant to transact in volumes typical for this time of year, while sellers are keen to list their properties,” said Andrew Lis, GVR’s director of economics and data analytics. “This dynamic is pushing inventory levels up to a healthy range not seen since before the pandemic. Buyers now have more options to choose from, driving all market segments towards balanced conditions.”
In June 2024, there were 5,723 new listings for detached, attached, and apartment properties on the MLS® in Metro Vancouver, a 7% increase compared to the 5,347 properties listed in June 2023. This total is 3% above the 10-year seasonal average of 5,554.
The total number of properties currently listed for sale on the MLS® system in Metro Vancouver is 14,182, a 42% increase compared to June 2023’s 9,990. This is 20.3% above the 10-year seasonal average of 11,790.
For all property types, the sales-to-active listings ratio for June 2024 is 17.6%. By property type, the ratio is 13.1% for detached homes, 21.1% for attached properties, and 20.3% for apartments. Historical data analysis suggests that downward pressure on home prices occurs when the ratio dips below 12% for a sustained period, while home prices often rise when it surpasses 20% over several months.
“With an interest rate announcement from the Bank of Canada expected in July, there’s a possibility of another rate cut this summer. This could further tilt the market in favor of buyers, even if the boost to affordability is modest,” Lis said. “However, June’s lower-than-normal transaction volumes suggest many buyers remain hesitant, allowing inventory to accumulate and keeping upward price pressure in check across market segments. That said, well-priced properties are still selling quickly, indicating that astute buyers are spotting and acting on value opportunities.”
The MLS® Home Price Index composite benchmark price for all residential properties in Metro Vancouver is currently $1,207,100, reflecting a 0.5% increase over June 2023 and a 0.4% decrease compared to May 2024.
Sales of detached homes in June 2024 reached 694, an 18.2% decrease from the 848 sales in June 2023. The benchmark price for a detached home is $2,061,000, a 3.7% increase from June 2023 and a 0.1% decrease compared to May 2024.
Sales of apartment homes totaled 1,245 in June 2024, a 20.9% decrease from the 1,573 sales in June 2023. The benchmark price of an apartment is $773,400, a 1% increase from June 2023 and a 0.4% decrease compared to May 2024.
Attached home sales in June 2024 totaled 456, a 16.6% decrease from the 547 sales in June 2023. The benchmark price of a townhouse is $1,138,100, a 3% increase from June 2023 and a 0.6% decrease compared to May 2024.
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