We are currently in a preconstruction cycle that has started in 2012. All preconstruction that have been already completed have a very large inventory. There are still 11,000 preconstruction units left to be built and the inventory is foreseen to be even bigger than before!
For example, there are 228 months of supply at Echo Aventura for example. It means that among 1000 apartments at Echo Aventura, less than 5 would have sold over the period!
The number of months of supply indicates how many months it would take for all the current homes for sale on the market to sell, and it is currently huge! It is quite an alarming observation but the slow down shall end soon.
However, even if the preconstruction inventory is very large, very few people have sold their properties at a loss as of now as compared to the previous cycle in 2008. Because people have mostly bought cash and are not obligated by a mortgage in most cases, they are not in need to sell right away so they are still holding to their properties and now wait before selling.
Indeed, under this condo cycle, only a few preconstruction buyers have undergone losses in the resale market.
This may change as we get deeper into the cycle and there is very little resale activity in the market.
2 questions remain:
Will buyers on preconstruction condos in the cycle hold onto their units indefinitely OR will they lower asking prices and attempt to sell?
Will the next wave of projects to be completed continue this trend and have upwards of 35% – 40% of the units in each project immediately listed on the MLS for resale?