Rising presale condo costs make resales a better deal: study
RESIDENTIAL | Starts fall 41 per cent as land prices and input costs threaten to push prices out of reach
Ashortage of new condominiums and townhouses is looming in Metro Vancouver as soaring costs of new construction have chopped presales at new project launches and put several planned developments on hold.
For buyers, this means that resale condos may represent not only lower prices but the only option in some markets, according to a new study.
“Construction costs of residential buildings grew by per cent year over year in the first quarter of ,” noted Engel & Völkers in its Mid-year Luxury Real
Estate Report. “These rising costs are trickling down to consumers and contributing to increases in new home prices. Higher material costs combined with government regulation are creating real and present pressures on new home building in Canada.”
Metro Vancouver is seeing the results.
Starts of new condo apartments fell per cent in ’s first seven months compared with the
same period in , according to Canada Mortgage and Housing
Corp., while starts of new strata townhouses fell per cent in the same period.
In all, more than , fewer strata homes have broken ground this year than last.
At the end of ’s second quarter, Altus Group noted it was tracking “coming soon” strata projects in Metro Vancouver that had marketing stating they were planning to open by spring .
In an email to Western Investor,
Altus confirmed that the launches of six of those projects were delayed due to slowing market conditions and rising interest rates.
Of the eight Metro Vancouver condo projects that did launch in July, presales reached an average of just per cent, according to
MLA Canada, which monitors the new home market in Canada. This compares with presales of up to per cent of new condo units earlier this year and up to complete sellouts that were common during -.
“Many developers are holding new project releases for the fall or spring markets, further restricting supply,” noted
Suzana Goncalves of MLA Canada, which monitors Vancouver’s presale market.
Gregg Baker, a Vancouver real estate adviser with Engel & Völkers, said it all comes down to price, suggesting that resale condos offer better value than new units.
Baker said the last big successful launch of a Vancouver condo project was the Butterfly by
Westbank, a -unit, -storey luxury tower at Nelson Street that i s scheduled to be completed in and sold out at average prices of $ , per square foot a year ago.
Developers looking at launching new Vancouver projects today are contending with even higher prices, Baker noted, in some cases cresting over $ , per square foot.
“There is some disbelief at those prices,” Baker said.
He added that a number of “solid, reputable” developers who have bought “very expensive” land in the past two years are having doubts about when they will launch as higher mortgage rates cool the overall market.
But Baker noted that condo buyers can purchase older, quality apartments in Vancouver’s upscale Coal Harbour neighbourhood, from $ , per square foot.
“Even with renovations and upgrades, you are still coming in at less than a new condo,” he said.
An REW. ca search for resale condos this week found Vancouver downtown units from $, per square foot, Kitsilano condos at $ per square foot and East Vancouver condos from $ per square foot, similar to prices in suburban markets.
Aside from high land prices, new condos are subject to extra charges that are not applied to existing homes, noted Kevin Skipworth, managing partner
with Dexter Associates Realty in
Vancouver.
“In Vancouver, city development fees and charges average $, on a new condo,” Skipworth said, “and this does not include the federal GST, which nails another five per cent to the cost, or the increase in building material costs over the past year.”