Metro Vancouver presale condominium prices are set to drop approximately 10% in 2012 as marketers grapple with rising inventory in pockets across the region.
MPC Intelligence and Strategics' Condominium Market Opportunities Report on Metro Vancouver's condo market notes that highrise, presale condominium prices were close to $586,000 in late 2011. The recently released 416-page report projects that average prices in 2012 will be closer to $530,000. It predicted that sales will stall if average 2012 prices remain higher than $530,000.
Jeff Hancock, MPC's senior manager, told Business in Vancouver that the projected price dip is likely partly because of an "oversupply" of concrete units in 15 southeast False Creek developments – enough sales inventory for 23 months.
He added that two other areas similarly have an "oversupply" of low-rise condominiums: Langley-Cloverdale (a 27-month supply in 18 separate developments) and south Surrey (a 22-month supply in 16 developments).
Hancock's calculations show that 894 of 2,213 new units remain on sale in southeast False Creek. About one-third of the available units are complete: in the Village at False Creek, Maynards Block and Pinnacle Living False Creek.
South Surrey has 1,075 new units, 435 of which are for sale; Langley-Cloverdale has 1,729 new units, 769 of which are for sale.
But developers dispute Hancock's theory.
Hani Lammam, Cressey's vice-president of development, told BIV that there's no condo oversupply in southeast False Creek.
"Other than the product that is available in the Village, which has its own problems, there's not an oversupply."
Lammam bases that view on the fact that, outside the Village on False Creek, few completed projects have unsold homes. Cressey started marketing 155 homes in its $87 million James project on West First Avenue in May 2010. The project is set to be completed by August, and 20 homes remain unsold.
Lammam's company will launch sales for its $85 million, 169-home Intermeccanica development on April 14.
Hancock said other developers have had success selling out projects when their homes are not priced too high.
"In the last year and a half, there's been a trend by developers to push pricing at subsequent launches," Hancock said. "One developer comes out at $X per square foot and, within a few months, another project comes along and it is $X-plus-whatever."
Hancock added that three large developers in particular (Wall Financial Corp. (TSX:WFC), Concert and Polygon Homes) have had success selling multiple projects because they weren't aggressive on pricing. As an example, he pointed to Wall Financial quickly selling out more than 400 homes in its Wall Centre False Creek, which is scheduled to be completed in 2013.
"They launched at about $635 per square foot when the rest of the market was in the $700 range, and they did very well," Hancock said. "Time and again, they come to the market with less aggressive pricing, and they always seem to do well."
Wall Financial also posted strong sales at its Edgewater development in south Surrey after it priced those homes below the neighbourhood's going rate. But Lammam said there's more to a development than price.
"James has some architectural expression. The Wall buildings are pretty square," he said.
"We price our product relative to the quality of product that we deliver. James is priced at $685 per square foot, and it's an air-conditioned building. Wall sold for $650 per square foot, and it's not air-conditioned. So what's air conditioning worth?"
Polygon CEO Neil Chrystal told BIV that his company always aims to provide the best value, but he added that being the best value doesn't necessarily mean having the cheapest product in the neighbourhood.
"We have a lot of respect for our customers," he said. "They're pretty streetwise. They have a sense of what a fair value is for anything. We know that they shop around and look at our competition."
Chrystal expects strong market response when Polygon launches sales in mid-May for its 252-home, 33-storey Moda project adjacent to Metropolis at Metrotown in Burnaby. •
