Now let’s take a look at the other side of the coin: Condos.
Condo inventory has risen substantially, particularly in Vancouver, without the demand to keep up. In fact, inventory levels are higher than home buyer demand, meaning we have more supply than people wanting to buy. So how on earth are we talking about a condo increase in this blog?!?!
Well when detached homes become less and less affordable, three steps come into play when looking at a Buyers decision making process:
YES, means they proceed forward and purchase.NO, means we need to move to step two. Of course as prices increase, more and more buyers are answering ‘NO’ to this question.
Value in this case is not just monetary value. But can we support the lifestyle we want to live now and in the future, by moving from say Vancouver, to Surrey? This may be a daily commute, distance to amenities, affordability, housing type, schooling for children, and many more aspects specific to each individual buyer. As we’ve already discussed, Detached pricing is on the rise, not just in Vancouver itself, but all across the Greater Vancouver area, including Port Coquitlam, Maple Ridge and more. The Fraser Valley is also seeing a surge upwards in its markets too, including large areas such as Surrey, so more and more people are not seeing the trade off in value.
If the answer to this question is YES, then as per the above step, they proceed forward and purchase. If the answer is NO, we proceed to Step 3
Step 3) What Is More Affordable And In My/Our Budget?
The answer to this question, is of course condos and townhomes. The detached market rises to a point of unaffordability, and buyer attention moves closer to condos/townhouses. (The same works in reverse, when condos are really hot and pricing increases, it gets to a point where it makes sense to pay the extra for a detached house.) Due to the gap in affordability, Purchasing in your desired area becomes only achievable by an attached home purchase.
This is where we start seeing the numbers shift, and condos/townhomes start to become more and more appealing to buyers.
The big caveat to this being, this process does not happen overnight. All the time that the detached market is getting hotter and hotter, the condo market is getting softer and softer, with people needing to sell. So it’s only natural to see downward pressure on prices before things get better. In our opinion, we haven't seen the full correction yet in the condo market. Inventory is still on the rise, with a lot of homes building their days on market to significantly higher numbers, whilst competing with more and more properties. As to exactly what the price correction to condos will be, we still don’t have that crystal ball, but I would believe a range in and around 5% for now.
All of this needs to happen before we start seeing the condo boom, but nonetheless it will come. Don’t forget, real estate is cyclical after all.
Thanks for reading along this week! As always, we’d be happy to answer any questions you have. You can always reach out to us on the details below!
Until next week,