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The final months of 2024 present a unique situation in Vancouver’s presale condo market, particularly for developments along SkyTrain corridors. Let’s examine the current market data to understand why this might be a strategic time to invest in a Vancouver presale condo.
Current Vancouver Presale Market Conditions Show a Clear Shift
The summer of 2024 witnessed a notably quiet real estate market in Vancouver, with momentum distinctly shifting towards buyers. This shift resulted in growing inventory levels, particularly along SkyTrain station corridors where new developments are either launching or under construction. Many Vancouver presale developers responded by postponing launches or holding inventory, leading to increased flexibility in pricing and presale condo incentives.
Vancouver Presale Market Data Reveals Opportunities
The first three quarters of 2024 saw approximately 80 presale condo project launches in Metro Vancouver, introducing over 7,000 new units to the market. With an absorption rate of about 45%, just over 3,000 units sold. This pace appears to be tracking similarly to 2023’s numbers, which saw 104 presale projects and over 13,000 units launched.
The current market dynamics show a significant spike in new listings combined with patient buyers, leading to an unprecedented accumulation of available inventory. This creates a genuine buyer’s market for Vancouver condos, particularly in areas connected to transit infrastructure.
Housing Starts Data Signals Future Supply Constraints
Recent CMHC data reveals several concerning trends for the Vancouver property market:
- Housing starts in Canada dropped by approximately 30,000 units in 2023, marking a 12% decline from the usual annual average of 250,000 units
- Vancouver presale developments specifically saw a 19% decrease in year-to-date housing starts as of September 2024
- While purpose-built rental development starts increased, this won’t adequately address the shortage of affordable ownership options
- The private sector, which accounts for approximately 95% of housing in Canada, was significantly affected by current economic conditions
- The uptick in housing starts concentrated predominantly in Alberta, Quebec, and the Atlantic provinces, while British Columbia continued to struggle with new housing moving forward
Expert Market Analysis and the Presale Advantage
Deputy Chief Economist of CIBC World Markets, Benjamin Tal, provides crucial insight into current Vancouver condo market dynamics: “For a buyer, the next year, year and a half, you have a window to actually get into the condo market because the condo market will be soft.”
Tal elaborates on the current situation: “The condo market is a dead market. It’s basically frozen. We have a situation in which interest rates are so high still and prices are high. Therefore, investors are in a negative cash flow position.”
This temporary market freeze creates particularly compelling opportunities in the Vancouver presale market. Buyers can secure properties at today’s reduced prices and with enhanced incentives, while delaying completion for 3-5 years. This timing advantage means buyers can:
- Lock in current market prices during a buyer’s market
- Take advantage of presale condo incentives and pricing flexibility
- Avoid immediate exposure to today’s high interest rates
- Time their completion to a potentially improved market cycle
- Build equity before completion through potential price appreciation
Looking ahead, Tal warns: “two years from now, there will be upward pressure on prices because we simply won’t have the supply. Eventually, those extra inventories will be cleared and the market will be in shortage again because the fundamentals of the market are still very strong.” This prediction makes the presale market particularly attractive, as buyers can secure tomorrow’s housing at today’s prices.
Interest Rates and Market Impact
The Bank of Canada implemented three rate cuts earlier in 2024 & a 50 basis point cut in October 2024. The expectation is this trend will continue. This shifting rate environment, combined with current market conditions, creates a potential sweet spot for presale condo buyers who can secure properties before increased competition returns to the market, while avoiding today’s high interest rate environment until completion.
Fall 2024 Market Outlook
This fall market presents several key factors for the Vancouver new construction market:
- Approximately 12 new projects expected to launch
- Addition of roughly 2,000 units to the market
- Unprecedented developer flexibility in pricing and incentive structures
- Increased competition among developers in transit-oriented developments
Window of Opportunity for Presale Investment
Current market data points to a unique confluence of factors favoring Vancouver presale buyers:
- Building inventory levels providing more options and negotiating power
- Developer incentives and pricing flexibility at historic levels
- Strategic timing between high rates and anticipated future demand
- Clear signals of future supply constraints
- Extended completion timelines offering market cycle advantages
For those considering a presale condo investment near a SkyTrain station, the final months of 2024 present a strategic window of opportunity. The combination of current market conditions, developer responses, and future supply constraints suggests that acting during this period could prove advantageous before market dynamics shift again. The presale market offers a unique opportunity to capitalize on today’s buyer’s market while positioning for tomorrow’s anticipated recovery.
Frequently Asked Questions: Investing in Presale Condos Near SkyTrain (October 2024)
Q: Why should I buy a presale now when the market is soft?
A: According to market expert Benjamin Tal, we’re in a unique window of opportunity. You can secure property at today’s reduced prices with better developer incentives, while delaying completion until market conditions improve. The current market freeze has created unprecedented negotiating power for buyers, but supply constraints indicated by CMHC data suggest this won’t last.
Q: What about the high interest rates when buying a presale?
A: One key advantage of buying presale in the current market is that you don’t need to qualify for a mortgage immediately. With the Bank of Canada having already implemented rate cuts equaling 1.25% in 2024 and more expected, the rate environment at completion time may very well be more favorable than today’s rates.
Q: How does current inventory affect presale prices?
A: Current data shows only a 45% absorption rate of the 7,000 new units launched in the first three quarters of 2024. This high inventory level combined with new fall launches is pressuring developers to offer better prices and incentives, creating opportunities for buyers that weren’t available in previous years.
Q: Should I wait for prices to drop further in the Vancouver real estate market?
A: CMHC data shows housing starts have dropped significantly – down 19% in Vancouver as of September 2024. As Tal warns, “two years from now, there will be upward pressure on prices because we simply won’t have the supply.” This suggests the current window of opportunity may be limited. It is also worth noting that while prices are off from the highs they have not dropped that much since the rate hiking cycle began more than 3 years ago. It would be a surprise if prices continued to decline alongside interest rates.
Q: What makes SkyTrain-connected properties different?
A: While the entire market is experiencing a slowdown, areas along SkyTrain corridors traditionally maintain their value better and show stronger recovery potential. Currently, there are approximately 12 new projects expected to launch near transit hubs, offering a good selection of inventory.
Q: What kind of developer incentives are available?
A: The current buyer’s market has led developers to offer unprecedented flexibility in pricing and incentive structures. Specific incentives vary by project, but the current 45% absorption rate is motivating developers to be more accommodating than in previous years. Check out our post where to find presale deals for a list of some of the current incentives or get in touch.
Q: What are the risks of buying in today’s market?
A: While the market is showing signs of softness, CMHC data indicates a significant drop in housing starts, which could lead to future supply shortages. The main consideration isn’t whether to buy, but rather timing your purchase to take advantage of current buyer-favorable conditions before the market shifts again. In other words, conditions could become even more favorable for buyers before the market reverses its course. Timing any market, however, is very difficult and incentives disappear immediately when the market begins to pick up.
Q: How does the current construction slowdown affect future supply?
A: Canada is chronically short on housing & Metro Vancouver is the most housing challenged region in the country. Housing starts in Canada dropped by approximately 30,000 units in 2023, a 12% decline from the usual annual average. With the private sector accounting for 95% of housing in Canada, & Vancouver performing even worse than the country at large for housing starts, this slowdown in construction today will lead to supply constraints in the coming years.
Q: What signs should I watch for in the market?
A: Key indicators to monitor include:
- Further Bank of Canada rate decisions
- Housing starts data from CMHC
- Absorption rates of current presale projects
- Absorption rates of current resale market as there is a correlation
- Developer incentive offerings
- New project launch announcements
Q: How long might this buyer’s market last in Vancouver presale?
A: According to Tal, buyers have “a window of about a year to take advantage of a weaker condo market.” This timeline aligns with current market data showing reduced construction starts and the anticipation of future supply constraints.
October 27, 2024 by Matt Scalena PREC.