November Vancouver CMA CMHC Data

CMHC released the starts and completions data for the November period this morning and here is what the data says.

One month starts were at an all time record high for the Vancouver CMA in November at 2768 units. The previous all time high was April 2004 at 2479. Clearly developers are building like crazy as they must feel that they can sell these units once they complete or perhaps it's a rush to the exits.

Completions ticked up a bit to a modest 1466 units. I think we can expect the completions number to trend upwards during 2008 as many projects that were started two years ago come online. The completions and starts numbers can be extremely volatile as one project can represent several hundred units.

Completed and unabsorbed inventory continues to relentlessly rise as newly completed unts are unable to be sold and this inventory is building. Completed and unabsorbed units in the Vancouver area at the end of November were 1337. Contrast that with Toronto, with double the population at 980. I have been watching this number as a barometer of demand in our local market. It seems demand at current price levels is lacklustre.

Now it is time to look like an idiot but have a little fun making predictions! Whenever the starts outpace completions it is a bull market for real estate and when starts drop below completions it is a bear market in real estate (see the red and green arrows).

I expect three things in 2008 in the Vancouver new home market:

1) Record levels of starts as developers see the writing on the wall and it becomes a rush to the exits much like has been seen in US bubble markets.

2) Record levels of completions as Olympic projects finish and labour becomes available to go full steam completing residential units and many condo towers complete. Unabsorbed units will rise throughout the year and we will witness big discounts by developers first in the suburbs then in the city.

3) Near record levels of units under construction as we are at all time highs right now and construction will fall as the number of units being completed outpaces new starts.

I suppose that I won't look like an idiot if all of the above turns out to be accurate but I more interested in the discussion about my predictions than in being right.