May 2006 Market Update
The market to date in 2006 has been sending us mixed messages.
Overall the stats still bear out a familiar story – limited supply of property for sale, oversubscribed by anxious and frustrated buyers. This is still frequently leading to competing offers, bidding wars and record prices.
Of particular note is the staggering jump in land values on the Westside. Typical 33′ and 50′ single family house lots have seen increases of as much as 15-20% in the last six months. Interest rates have crept up but are still historically low.
Construction costs have taken a huge jump upwards in the past year and this is having a direct effect on the developers. A number of large condo projects have been delayed and even cancelled due to escalating costs. It has also meant that those projects which are going ahead will cost a lot more to build than the projects which were bid on a couple of years ago. For the consumer what this could signal is the end (for now) of the pre-sale party. While buying pre-construction is attractive because it is so convenient and low maintenance as an investment, if you can find better value in existing product, that somewhat defeats the purpose. As always, there are exceptions and unique product can buck the trend whether its pre-sale or re-sale. The Woodwards project in Gastown is a prime example.
What does this all mean to you as a buyer or seller? My best guess is that this intense pressure on prices will force buyers to back off a little which could take the heat out of the market for a few months, while it adjusts. This kind of minor correction could be exactly what the market needs in order to sustain itself over the long term and prevent those infamous “bubbles” from bursting!