There are currently 50 brand-new homes for sale in West Vancouver priced over $4.5 million. This is the highest inventory we have ever had. Most of these homes did not exist 24 months ago, they sprung from “teardown” properties sold in the very robust real estate market of January through July 2016. The term “teardown” is a bit misleading. Many are perfectly good homes that in most communities would not be torn down. Property in Greater Vancouver has become so expensive that properties greater than 30 years old are now at risk of demolition. With such a large inventory of new homes available, developers are less interested in building. This lack of demand has a negative effect on pricing of “teardown” properties. Think of the “teardown” as the raw material and the brand-new home as the finished product. If the finished product is not in demand, the price of the raw material declines. New homes take approximately 12–24 months to build so I anticipate an over-supply for quite some time.
This may be a concern if you are planning on selling your house in the next 24 months. I believe it will take that long to sell the excess new home inventory. Until that inventory is reduced, and builders re-enter the market in significant numbers, the demand for “teardown” homes will likely be tepid. Prices may fall and selling times will increase. There have been 80 Residential Demolition Permit applications submitted to the municipality this year. By comparison, this time last year there had been approximately 150 and in November 2015 there had been approximately 175. I believe the spring market will be crowded with Sellers. Many people prefer to sell at that time of year and inventories are usually highest between April and June. If you are considering selling and live in what the market considers a “teardown” it may take longer than you anticipate.
So, what should you do if you live in a “teardown” and were planning on selling in the next 12 to 24 months? Consider listing now. Although prices have fallen from their July 2016 peak, the West Vancouver market is still within 10% of its all-time highs. Inventories will likely drop over the next 45 days and start to increase as we enter the new year in anticipation of the spring market. One of the advantages of selling a “teardown” property is that you do not need to prepare the house for sale. As a developer will be the likely purchaser, he will only have an interest in viewing the land and may only need access to the house once (maybe not at all). There will be no need for an Open House. Also, a developer is willing to purchase any time of year, making the winter months just as attractive as the crowded spring market where your house may receive less attention from buyers. Also, a developer will allow for a long closing period. It usually takes a minimum of 6 months to receive building permits from the district. Because of this, a builder will usually allow you to remain in the house until he is ready to build. Contracts can often be written with quick closings (when you get your cash) and long possession dates (when you must move out) of up to 12 months. This allows plenty of time for you to find a new home.