The supply / demand situation for condo buyers is almost frightening. With so few properties for sale, quality condos in sought-after areas are often receiving 6, 8,12 (!) offers and selling for close to 30% more than just last summer. A condo worth $489k last summer listed last week for $539k, and sold for $620k. And a condo worth $550k last summer was listed at $599k and sold for $675k. There's many more examples like these from just the past month. Of course, it's happy days if you have a condo to sell.
What’s driving this price surge? We're experiencing a "perfect storm" of buyer groups jousting with each other. For example, in selling condos that would have recently primarily appealed to buyers in their 20s–30s, say one + den condos in Kitsilano, Olympic Village or Lower Lonsdale, I now see at least four common and distinct buyer profiles: The younger people are still there, but, increasingly, they just can’t compete against the now very common baby boom down-sizers, and the offshore buyers. Many down-sizers, having recently sold their family home, are now flush with cash. And with condo prices often 1/3 or less of the value received for their home, these down-sizing buyers can aggressively bid up the price, to get what they want. The relative ease of many offshore buyers to pay well beyond the listing price adds more pressure. The fourth type of buyer? New residents flowing into Vancouver from across Canada, and around the world. This leaves the younger buyers, or first-time home purchasers, or those with more modest means, out in the cold.
In the 2 or 3-bdrm condo market, younger families, priced out of the single family home market, also find themselves competing with the baby boom crowd. Even upscale condos at higher price points - $1.2M and beyond - are seeing stiff competition amongst offshore buyers and baby boom down-sizers.
The new condo towers sprouting up may not help to ease supply constraints. Although I have no hard data, I speculate that many pre-sale condos are sold at offshore "selling fairs" many months before local residents have a chance to purchase them. I was on an alert for a new Main St. development in Vancouver that has yet to open its sales centre. We just received an email stating "thanks for your interest; the development is 85% sold to early registrants". My guess is that many of these "early registrants" are not from the Vancouver area.
Another sales centre for a False Creek development has 6,000 early registrants. It’s not clear who these 6,000 early registrants are, but they're not my clients, and I bet many - if not most - don’t live in Canada. Odds are 80% of these pre-sale units will be rentals. This may help the rental pool, but it doesn’t help the long term financial health of the city's young people.
If you're selling any type of home these days you may be shocked at what I can sell it for. And if you're buying - or trying to buy - you may be shocked as well! How long will this continue? Demand, and thus values, is bound to fluctuate. But until something happens to change the supply/demand dynamic (and it could happen virtually overnight) be prepared for the status quo. As our friend Ozzie Jurock says, values grow where people go. And many people want a piece of our part of the world.
(Note: This article was originally published in my monthly e-newsletter. Drop me a line if you'd like to subscribe.)