Vancouver, like many other cities across Canada, is facing a pre-construction slowdown in the condo market. Not entirely shocking, between interest rates soaring, construction costs up, and fewer buyers in the market, the math checks out. 

 The Canada Mortgage and Housing Corporation (CMHC) has reported that new build starts have fallen 23 per cent in the first half of the year compared to last. Many developers in the city are taking a more cautious approach to starting new projects and some are even holding out for more favourable timing in the market. 

Why is Vancouver Seeing a Slowdown of Pre-Construction Condo Builds? 

Rising Interest Rates

Rising interest rates have been the great demise to many sectors, and Vancouver’s housing industry has not been spared. We have seen interest rates only continue to climb this year, resulting in both the delay and cancellation of many development projects. Between these newly hiked rates impacting developers, and monthly payments skyrocketing for buyers, it is no surprise the city has seen the slowdown in pre-construction builds it has. 

 When it comes to home affordability in a market with interest rates as they are, knowing your financial position will be crucial. A Stress Test will determine, based on your financial standing, if you’ll be able to continue paying your mortgage should interest rates continue to rise. 

 Check out this Stress Test Calculator to see where you stand. 

 Construction Costs

Over the past year there have been significant increases to construction costs. With these rising costs, developers have been left in some precarious situations. Concrete, steel, glass, and piping have all seen an increase in price and have caused a ripple of delays in the building industry. Stat Canada reports that residential building supplies have increased by 5.3 per cent in Q2 and 2.5 per cent in Q3 of 2022. 

 Labour Shortage & Strikes 

The city, along with much of Canada, has seen a drastic shortage in labour in the construction industry. Despite there being a reported high number of job vacancies in the sector, according to Stat Canada, many projects have been suffering due to lack of labour. In British Columbia, the current shortage of skilled labour is below 2018 numbers. This lack of skilled construction workers in the province has taken its toll on the industry. Along with a shortage in labour, there has been an increased number of strikes within the industry as workers are demanding better working conditions and higher wages to compensate for the recent inflation spikes. 

Supply Chain Delays 

Along with labour shortages across the board in the industry, and construction costs, many building projects have faced supply chain delays that have greatly disrupted project timelines. An ongoing issue from a multitude of things including, the lingering impact of the pandemic, the current geopolitical environment, increased fuel costs, and a spike in inflation. Developers have had to navigate these delays and, in some cases, have had to cease builds altogether. 

Permit and Project Approval Delays 

Another driving factor in construction slowdown across the city are the permit and project approval delays. Between the red tape and the bureaucracy involved in obtaining permits, it can take months to obtain the proper documentation and approvals to move forward. These delays can be both costly and timely for developers. 

Why it’s a Good Time to Buy

Fewer Buyers 

Post-pandemic Vancouver has seen a drop in buyers. Once again, we are seeing the market even out after a frenzy of a couple years. Known for being the center of luxury homes in Canada, luxury sales have reportedly decreased by 58 per cent from this fall to last. Purchasing at a time when there are fewer buyers in the market can work in your favour as you encounter lower prices, more options, and less competition. 

Inventory Accumulation 

With less buyers in the market and sellers still selling, we’re seeing an increase in inventory. This current inventory accumulation is offering buyer’s a great selection. As a buyer, now is a great time to get into the market as there are comparably more options than this time last year. Inventory accumulation has also played an instrumental role in bringing prices down. 

Prices Declining 

Sellers have been strategically pricing their homes with the current market conditions. Homes priced more competitively to sell in the city have seen a greater success rate in selling. With less buyers and overall competition in the market, homes are no longer selling far beyond the asking price, making it a very attractive time to purchase. 

Less Bidding Wars & Less Competition 

There have been notably fewer bidding wars occurring and houses are no longer receiving multiple offers like they had been years prior. Buying when there is less competition in the market can provide the optimal buying experience. There is more time to dot your i’s and cross your t’s. There is also more room on the table for negotiations. Be it in the price, closing date, or other conditions in the offer, now is the time when you can call some of the shots. 

What’s So Great About Living in Vancouver? 

Lorina Catanzaro, a Condo Dork affiliate agent in Vancouver and relator at Royal LePage Sussex, shares why it’s a great time to consider buying in Vancouver right now:

• Vancouver is currently ranked 34 of the best 100 cities in the world.
• Benchmark apartment prices have fallen, and this is an exciting time for buyers to take advantage of these new lower prices. 
• Supply is higher, especially in the sub regions, more choices to choose from with fewer bidding wars.
• We appear to be near the end of the rate hike cycle and Bank of Canada stated this on the latest rate announcement. Less fear of ongoing interest hikes, while also taking advantages of price declines. 
• Higher mortgage rates have in fact created opportunity for buyers. When rates are low, it is extremely competitive for buyers so the conditions this year have improved immensely on the buying side. 
• Take advantage of the market during fall and winter, which typically has less competition for buyers purchasing a home. 
• The price you buy your home for won’t change, however, your mortgage rate will and now is a good time to best position yourself. You can purchase lower and pay slightly more on your mortgage, and when rates drop you will have not overspent risking excessive mortgage payments. 
• Never a dull moment in the Vancouver market, so investing is always worth it. 
• Vancouver is currently identified as the only city in Canada where it is cheaper to own than to rent! 
• Canada is continuing to ramp up immigration and have already been exceeding immigration targets. These new Canadians need homes, and it is a great time for investors. Particularly with Vancouver being such a desired city to live in. 
• The new Vancouver Amazon building will be complete in 2023 and will be hiring over 500 new jobs. These people will be needing places to live, and prices are going to increase substantially, so get in while you can.
• Microsoft opened a new office in Gastown and is steadily expanding and hiring over 250 jobs in Vancouver. These people will need a place to live, meaning prices will rise and the rental market will be almost impossible. This is a great time for buyers and investors to take advantage of this money-making opportunity before Vancouver becomes unaffordable.