Special Report - MLS Price/Sales Relationship 
March 15, 2010

The relationship between price and sales of apartment condos can perhaps best be shown by graphing the cumulative price distribution of sales. The result is usually an "S-shaped" or sigmoidal curve, somewhat flat at both ends and steeper in the middle. The bottom part of the curve represents the "budget" segment of the condo market; very price sensitive. The middle part, which takes up most of the curve, represents the "mid-market" segment. The top end is the "luxury segment of the market; the least price sensitive segment.

High Rise Sales



The cumulative price distribution graph of MLS high rise sales in Greater Vancouver over the past three months shows the typical "S-shaped" curve. The bottom or "budget" segment makes up about 10% of MLS high rise sales and ranges from $138,000 to $260,000. Price changes in this segment have quite a pronounced effect on sales.

A $50,000 price change in the "budget" segment will change sales by about 4 percentage points. But since the entire segment makes up only 10% of the MLS high rise market, a $50,000 price increase would cut sales in this segment by about 40%. MLS sales of high rise condos in Greater Vancouver have averaged 500 sales per month over the past two years. "Budget" segment sales average about 50 sales per month, so a $50,000 price change would change sales by about 20 sales per month.

The "mid-market" segment, ranging from $260,000 to $530,000, has most of the buyers and most of the high rise condo product; both new and resale. Buyers in this segment are somewhat less sensitive to price changes. A $50,000 price change in this segment changes sales by about 12 percentage points. The "mid-market" segment makes up about 65% of MLS high rise sales, so a $50,000 price change will change sales within this segment by about 18% or about 60 sales per month.

Average MLS high rise prices are expected to increase by about 7% over the next 12 months. For the "mid-market segment" a 7% price increase is close to $25,000. Unless "mid-market" buyers are able to stretch their house buying dollar even more (unlikely with the anticipated rate increases), a $25,000 price hike will reduce demand in this segment by about 9% or 30 sales per month.

The "luxury" segment is the least price sensitive. A $50,000 price increase in this segment reduces sales by less than one percentage point. The "luxury" segment of the Greater Vancouver high rise market makes up about 25% of total MLS high rise sales with prices ranging from about $530,000 to $2 million and over. A 7% price increase in this segment would likely reduce monthly sales by 5 or 6 units.

Low Rise Sales




The cumulative price distribution of MLS low rise condo sales over the past three months shows a similar pattern to high rise sales but with major differences in price points. The "budget" segment for MLS low rise sales ranges from $80,000 to $175,000 and includes 7% of low rise sales. A $50,000 price change in this segment will change sales by just over 50%.

The "mid-market" segment for MLS low rise sales is larger than for high rise condos. It includes about 78% of total sales and ranges from $175,000 to $410,000. A $50,000 price increase in this segment of the low rise market would reduce sales by about 19% or close to 80 units per month. If average low rise prices increase by 7% over the next 12 months, sales are expected to slip by about 6% or 35 sales per month; similar to the effect of 7% price increase in the high rise market.

The "luxury" segment of the low rise market isn't as pricey or as large as the in the high rise market. The MLS low rise "luxury" segment includes the top 15% of the market and ranges from $410,000 to $900,000 plus. A $50,000 price increase in this segment would reduce sales by less than 10% or about 7 to 8 sales per month.

More Info

Price distribution of sales varies greatly by market area within Greater Vancouver. For more detailed information about the relationship between price changes and expected sales by specific market area, contact Strategics.