The real estate industry is paying a price for Vancouver housing supply, with the average price of a condo now sitting at $1.2 million.
That’s up from $938,000 in July, the latest data available from real estate website Zillow.
The average price for condos is $2.3 million, up 3.5 per cent since January.
The benchmark price for detached homes in Vancouver has dropped 4.5 times over the same period, to $1,788,000.
“We are in the midst of a housing crisis,” Zillows chief economist Kevin McDonough said in a note.
“The market is going through the motions, but that’s because the fundamentals aren’t strong enough to sustain prices.”
The number of condos in Vancouver’s market has dropped over the past three months from a peak of around 2,000 units in February.
The province has been battling a supply shortage.
The market is now down to around 1,800 units, compared with 2,700 in April.
Zillower is forecasting a 2.6 per cent drop in the number of detached listings this year, compared to a 1.6-per-cent drop in 2015.
The downturn in demand has created a supply glut that’s squeezing out condo builders.
“It’s a huge issue for developers and condo builders,” said Jim Chabot, managing director at Zillovision, a Toronto-based real estate company.
“They’re not going to be able to sell condos because of the supply constraint.”
In recent months, there have been a number of supply shortages, with condos now selling at $3.5 million and $2 million, respectively.
That means that prices for condos are now in line with their market value.
Zilovision’s Chabots’ forecast is lower than the official province-wide average of $2,700, but he said that doesn’t necessarily mean the condo market will suffer a shortage.
“This is not a situation where the market is actually collapsing,” he said.
“That’s a long-term situation.
There’s still demand and supply, but there’s a very real opportunity for developers to be more competitive in terms of pricing.”
Chabos also said that a number local developers are pushing for a condo tax to help address the shortage.
In the last few months, the province has introduced an 8 per cent property tax on condos, which would be applied to the value of the unit, up from 5 per cent in January.
If the condo tax was introduced, developers would be required to sell their units at market value for the provincial rate of 8 per of the median market price.
This would mean developers would need to offer the units for as much as a $20,000 premium to get a sale.
It’s unclear whether the provincial government would be willing to consider a tax increase to offset the condo shortage.