After taking a bit of a break in Q3-2021, Vancouver’s new multi-family home buyers came charging back during the last three months of the year to break regional sales records.

In its quarterly Metro Vancouver Multi-Family Take report for Q4-2021, Zonda Urban stated that there were 26,291 new home sales in 2021, breaking the previous annual total sales record set in 2016 by 30%, when 20,280 sales took place. The total number of transactions in 2021 was just 7,500 sales shy of the total number of units sold in the last three years combined.

In the final quarter of 2021, a record-breaking 7,655 new condo and townhomes were sold across Metro Vancouver, up 40% from Q3-2021. This was just 67 homes fewer than the total number sold in all of 2019.

“The sales results of 2021 are even more remarkable given they occurred during a global pandemic when local buyers endured two different variant waves of the COVID-19 virus, a recurring stream of restrictive measures that made the sales process incredibly challenging, and multiple severe weather events, which caused catastrophic flooding that cut Metro Vancouver off from the rest of the province,” said Zonda Urban’s report. “The appetite for new multi-family homes across Metro Vancouver in 2021 was insatiable.”

Q4-2021 sees higher sales volume, less unsold inventory

In Q4-2021, 44 new projects were launched, a 17% increase in new units added to the market compared to Q3-2021.

One of the key indicators for how strong demand has been for new multi-family homes is the existing supply at the end of 2021, Zonda Urban stated.

All product types experienced a drop in unsold inventory during Q4-2021, particularly wood frame condos and townhomes, which were down by 40% and 38%. Five of Metro Vancouver’s 13 sub-markets did not have any move-in ready units available for purchase.

The number of Q4-2021 sales exceeded the amount of unsold inventory at the end of the quarter by 1,801 units. At the end of 2021, there were 5,854 unsold new multi-family properties, down 14% from Q3-2021 and a 18% drop from Q4-2020. 42% of the unsold properties are under construction.

Based on the average quarterly sales in 2021 — 6,573 transactions — the region’s current unsold inventory would be “absorbed before the end of Q1-2022,” if no new supply was brought online.

“The last time this was experienced in Metro Vancouver was 2016, which resulted in frenzied and FOMO-driven absorptions, and sharp and significant spikes in pricing,” said the report. “We are already experiencing considerable upward pressure on pricing in many sectors and areas of the market.”

The sales volume in Q4-2021 was 14% higher than the previous quarterly record established in Q2-2016. Last quarter was also 97% higher than the five-year average for quarterly new multi-family home sales.

Of Metro Vancouver’s 13 sub-markets, nine recorded higher sales in the final quarter of 2021. Surrey/North Delta, Langley/Cloverdale and Burnaby/New Westminster had the strongest sales activity thanks to a large quantity of popular concrete condo projects that were released.

The South of Fraser sub-markets were a main source of sales growth, where an all-time high of 3,542 units were bought and sold during Q4-2021. The area accounted for 43% of all new townhomes and condos sold in 2021, a noticeable uptick from 22% in 2016. This growth in the suburbs occurred early in the pandemic as demand for townhomes in Langley, Surrey and South Surrey climbed.

New home prices see quarterly and annual increases

In light of current inventory levels and the strong demand seen from buyers, new multi-family home prices faced upward pressure in the final months of 2021.

Wood frame condos and townhomes reported quarterly price increases of 8% and 3%, with average prices of $618,000 and $1,228,000. On a yearly basis, prices for the same product types rose 25% and 10%. From Q3-2021 to Q4-2021, concrete condos experienced much milder price growth, rising 0.25%. The reason for this smaller price increase could be related to softer demand for this product in Vancouver’s urban sub-markets, Zonda Urban explained.

All three product types combined reported a 10% increase between 2020 and 2021.

Looking ahead, inflation pressures on labour and materials, as well as higher costs for regulations and code requirements, are expected to place more pressure on prices in 2022. With the Bank of Canada having already made its first interest rate hike this year, this may impact further price increases as well, Zonda Urban noted.

FOMO continues to drive buyer decisions

New home buyers in Metro Vancouver have been prone to FOMO — fear of missing out.

Low inventory and the frenzied pace of sales kept FOMO running strong last quarter, which has depleted inventory. FOMO from capital appreciation, low interest rates and being priced out of the market also sustained buyer activity. As a result, the quantity of units sold during Q4-2021 exceeded the number of unsold homes.

“The increasingly limited supply levels combined with FOMO-driven demand inevitably drives prices higher, which was clearly evident during the latter half of 2021, just as it was in 2016,” said Zonda Urban’s report.

Last year’s rise in immigration and more impending interest rate hikes — which have created a sense of urgency — have also been contributing to buyer market demand. This, combined with rising construction costs and supply-chain issues has also kept prices up, and will likely keep them rising this year.

Zonda Urban : Multi-Family Buyers Smash Vancouver Sales Records in Final Months of 2021 by Michelle McNally | Livabl