Following the announcement that British Columbia is increasing their foreign buyer tax on home purchases from the current rate of 15-percent up to 20-percent, King 5 News reported that the move “may create more demand from wealthy Chinese investors and homebuyers who are looking to purchase property in Washington state.” Adding to demand amidst anemic inventory supply, particularly in downtown Seattle condominium stock, however, is causing some worry.
We already don’t have the supply to meet all the demands,” Eddie Chang, RSIR broker, tells King 5. “I already have a client that’s been looking for something for over a year.”
In order to try and combat the supply and demand imbalance, the article notes that “Chang and others are lobbying for changes to the state Condo Act.” Though it was designed to protect homeowners, it has in turn “created a disincentive for developers to build more condos and add to the supply issue.” The result? When new projects do come onto the market, they are met with crowds looking for an opportunity to purchase. King 5 News shared footage of the frenzy at the KODA Condominiums reservation weekend in late February, a project that went 98-percent reserved less than one week after reservation opportunities were made available.
In a recent piece in the Daily Journal of Commerce, Blaine Weber, Senior Principal of Weber Thompson Architects, spoke to the way that the liability associated with building multi-family units Washington state is keeping more condominium opportunities from entering the city. He outlined the “four-year phenomena,” in which plaintiff attorneys will approach HOA boards to encourage litigation before warranties expire, and the ways in which homeowners are often not well informed regarding the loss of value and difficulty of selling within the years-long litigation period. Weber suggests making slight changes, including shifting insurance into something more closely aligned with the processes currently followed in Vancouver, B.C. This would allow for warranty insurance programs to “weed out” non-meritorious claims before entering the courtroom, saving time and money for all parties involved.
“Changes to the Washington State Condominium Act are sorely needed to incentivize developers to build more affordable condominiums,” Weber adds. “As long as the economic opportunity for developing condos fails to offset the risk of ‘automatic’ litigation and non-meritorious claims, we will continue to see a diminution of this much needed housing stock.”
The resale condominium market in Seattle will remain tight until more inventory is delivered. According to statistics pulled from the Northwest Multiple Listing Service, the median home price of a condominium in downtown Seattle rose by 28-percent in February 2018 compared to the previous year, with an average asking price of over $1.3 million.