Pre-sales of new condominiums across Greater Vancouver and the Fraser Valley dropped from 91% of offerings in January to 50% as of June as the action shifts from “hyperactive growth to a more balanced, more normal market,” according to Suzana Goncalves, chief advisory office and partner of MLA Canada.
In its 2018 Mid-Year Market Review, released July 18, MLA, a Vancouver-based real estate market research firm, notes that pre-sale activity of new condo projects of from 50% to 65% is, historically, considered normal within the first six to eight months of a project launch.
In the first quarter of 2018, 79% of new condos pre-sold sold but this dropped to 67% in the second quarter, which MLA described as still “strong activity.” In the entire first half, 74% of the 7,753 new condos offered pre-sold. This is down from 87% in the same period a year earlier, according to Urban Analytics.
Goncalves suggested that the cooling sales could reflect government policies introduced in 2018, such as the increase in the foreign-buyer tax, stricter lending regulations, most notably the expanded mortgage stress test, combined with rapid price appreciation.
“The pre-sale market is anticipated to see fewer projects sell out upon release, but rather experience a steady and longer sales period,” the MLA report stated.
The most active pre-sales markets this year so far are in West Coquitlam and Burnaby North, with pre-sales higher than 90%. The lowest pre-sales are in projects in Richmond, at 39%, and Port Coquitlam, at 19%.
The City of Vancouver is seeing pre-sales of 61% in east Vancouver projects and 54% for new condo developments on the west side of the city, according to MLA research.
The anticipation of slower sales and potentially lower prices could be encouraging some pre-sale buyers to sell their sales contracts, which are known as assignments. A BIV survey July 18 of listing services Craigslist, Kijiji and Vancouvernewcondos.ca found 587 pre-sales condos being offered from West Vancouver and Squamish to Surrey and Langley by both real estate agents and private owners.
The February 20 increase in the B.C. foreign-home buyer tax from 15% to 20% could also be a factor in slower pre-sales. Since 2016, the share of new condominiums sold to foreign buyers reached 16% across Metro Vancouver and accounts for about one-quarter of buyers in Richmond and Coquitlam, according to Canada Mortgage and Housing Corp.
MLA is forecasting 67 new condo project launches representing more than 7,700 homes during the second half of 2018 across Greater Vancouver and the Fraser Valley.