Please find below an opinion I recently put together for a potential seller at The Fairmont Pacific Rim:
Downtown Vancouver’s Luxury Condo Market
Vancouver’s downtown condo market has become increasingly challenging for sellers in 2010. Uncertainty surrounding interest rates and global economics continue to cause would-be buyers to hold off, wait-and-see. At the same time, many sellers have over-priced their listings in hopes of adding to already inflated asking prices. The result is increased active listing supply and decreased buyer demand. Prices have begun to reflect this change in momentum and it appears that a buyer’s market is emerging once again.
Current stats and the near-term outlook
As of May 31, the MLS shows 1736 active condo listings in downtown Vancouver. There have been 168 sales in the last 30 days. This results in there being 10.3 months of active listing inventory. In all of downtown Vancouver, there are 34 active listings between $4M-$6M. 5 have sold since January 2010 and none have sold in the past 30 days. In Coal Harbour a similar inventory glut exists: 25 active listings in the $4M-$6M price category, 2 have sold since January 2010 and none have sold in the past 30 days. Accross all price categories in Coal Harbour there are currently 277 active listings. 14 have sold in the past 30 days resulting in 19.7 months of active listing inventory.
As a rule of thumb in Vancouver’s real estate market, 0-4 months of inventory = upward price pressure, 4-8 months of inventory = flatter pricing and anything over 8 months of active inventory = downward price pressure. I am seeing between 10 and 20 months of inventory in most price categories. This supply & demand ratio is now being reflected in both listing and sale price reductions.
For owners reselling Fairmont properties this year, there appear to be two options: One, hold the property until market demand supports current pricing; or Two, price to sell at current market value. From what I understand, many Fairmont buyers were lead to believe that huge profits were a near certainty, however, the reality of the market paints quite a different picture. Resellers of condos completed 2008 and later in downtown Vancouver will be lucky to break even in the current market (when including all financing, purchase and resale costs). As you know, the Fairmont completed this year at historically-high prices and the market has since cooled. Given GST, Property Transfer Tax, Financing costs and Sales Commissions and current market values, sellers can simply not make any money unless they got a special deal on their purchase price.
Current owners who utilized secondary financing sources are faced with significant holding costs as well as a potentially correcting market, making option #one a potentially costly option. I believe the best option for Fairmont sellers is to get ahead of the current price trend as soon as possible. Hanging on to unrealistic pricing in a declining market is a sure way to ride the market all the way to the bottom. If our market corrects 10% over the next year, sellers of properties values at $4.5M will stand to lose $450,000 in addition to their holding costs (12 x monthly mortgage interest and strata fees).
More and more media are reporting economists’ predictions of a market correction of up to 10% in the coming year.
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For sellers holding properties at high financing rates, it’s my recommendation that they make the tough decision whether to sell or not to sell. If the choice is to sell, then they must face the reality of sales at the Fairmont. The highest sale in 2010 to date was unit #2509 (a north-west corner unit). It sold for $2004 per sq ft. Given that the NW corner is the most valuable exposure in Coal Harbour, it’s very unlikely that properties with other exposures will sell at a higher $/sq ft. The preference for NW corners is consistent in every Coal Harbour waterfront tower, therefore non-NW corner owners who actually want to sell will have to price accordingly. In some cases, smaller north-facing properties may sell in a similar $ range but asking $2100 or $2200 per sq ft, in light of the #2509 sale, is not realistic.
It’s simple: Decide whether to sell or not. If you want to sell, price to sell regardless of the pricing of other listings in the building, and choose a realtor who isn’t afraid to tell you the truth. There are lots of hungry realtors willing to quote any price just to get a listing. Unfortunately, all you’ll achieve listing high is ongoing holding costs and increased risk of greater losses. If you choose to sell, I would be happy to speak with you about an effective strategy to get your property sold and mitigate your losses. Please browse the enclosed information supporting my recommended list price and feel free to browse my team website at: www.shaunkimmins.com There you’ll see that I was the top selling realtor in Coal Harbour in 2008 and 2009 and you can browse my current listings and recent sales. I look forward to hearing from you.
Please contact Shaun directly email@example.com to discuss whether it's a good time for you to buy or sell and please feel free to comment on this or any of my other Blogs or visit me at www.shaunkimmins.com