Posted by: Daryl & Wendy Ashby | December 18, 2010

Housing Market Whiplashed

When the Onni Group unveiled its Ora condominium tower in Richmond September 29 for local realtors, the entire 68 homes sold out in less than a week at more than $510 per square foot.

It was a hopeful harbinger for a Metro Vancouver housing market that is moving cautiously into the second year since a global recession slapped sales down 40 per cent and put a stop to double-digit price increases.

As 2010 ended, multiple listing sales through the Real Estate Board of Greater Vancouver were still down 36 per cent from 2009 and average prices had not moved in nearly six months. Condominium sales, which now dominate the market, were off by 38 per cent and the average price was nearly unchanged from a year earlier.

Still, there is now a palatable buzz of optimism in the air, as developers and analysts figure that 2011 will begin the turnaround in B.C.’s housing market, despite the harmonized sales tax, stricter regulations on mortgage lending and buyers still spooked by a sluggish economy.

“There are about 10,000 new condominiums in at least a dozen new projects that have launched pre-sale marketing since September,” said Jeff Hancock, a partner in MPC Intelligence, which tracks every new home project in the Lower Mainland.

Hancock said the success of different projects, on one hand the high-end Ora and the Quintet project by Malaysian-based property developer Sunrise Bhd., also in Richmond – which sold 300 homes in less than a month – and, on the other, affordable projects, such as Bruno Wall’s quick-selling 2300 Kingsway and Eldorado – where all apartments are priced under $300,000 – shows the sharp division in the market.

“[Metro Vancouver] is really a tale of two markets,” Hancock said. “An Asian market led by investors from mainland China and a domestic market that is very sensitive to prices and interest rates.”

It is those developers caught with finished product that don’t fit either market that are in trouble, said Andrew McMillan, MPC’s senior data analyst.

Asian buyers are active in Richmond, parts of Coquitlam and on the west side of Vancouver, where Canada Mortgage and Housing Corp.(CMHC) estimates that more than 60 per cent of the $1.5 million-plus homes are sold to Chinese buyers. Other areas, such as South Surrey and Burnaby, have seen projects stuck with unsold units, McMillan said.

There is an estimated 206 newly completed and unsold strata homes in South Surrey, for example, he said, but only 81 new condos have sold there since the start of this year.

“Some realtors are putting the wrong perception out there,” noted Salome Sallehy, hired to organize a sale at Watermark’s 2970 King George Boulevard project. “Inventory is just not moving because the market isn’t willing to bear those prices. Developers aren’t really acknowledging that.”

Watermark tried to blow out 37 one- and two-bedroom condos that had sat empty since construction finished a year ago – almost half of the development. The prices were discounted about 35 per cent from what the units sold for during pre-sales in 2006, Sallehy said. His one-day marketing blitz, however, resulted in just 10 sales.

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