Housing Correction Hits Canadian PropTech
Zonda Urban, a real estate analytics company, reported that new home sales (i.e. pre-sales) were down 72% on a year-over-year basis. The decrease in sales is partially explained by a decrease in project launches. Langley/Cloverdale sub-markets had the highest number of new Low Rise multi-family home sales in the Lower Mainland. New listings in Greater Vancouver are running 8% below their 20-year average, as active inventory for sale hardly grew in October. We are starting to see price points begin to stabilize as further interest rate increases slow sales absorptions, totalling just over 1,900. The Bank of Canada cited growing concerns around financial stability, and will perhaps announce a final rate hike in December.
One of the most significant corrections in the history of the Canadian housing market continues to challenge the iBuying model, and now Canadian PropTech company Properly announced a round of layoffs, reducing their headcount by 71. If you've driven by a bus stop lately, you'll likely have seen their advertisement with the Property Brothers as the face of their marketing campaign. Similar to dominant US real estate portals like Zillow and Redfin, Properly's business model consisted of iBuying and what they call "sale assurance". Sale Assurance allows you to buy before you sell, avoid paying more than one mortgage, skip the hassle of home showings, and offers a risk-free guarantee if it doesn't sell within 90 days. As homes are sitting on the market longer, and prices correcting, you can imagine how that certainty as a service would be troublesome.
Their last funding round was a CAD$44 million Series B, a decision meant to support the level of scale and growth that clearly will not materialize in the foreseeable future. While I'm all for innovation in real estate and wouldn't wish ill of any PropTech company trying to reduce friction in buying and selling, it seems like they too are joining the list of businesses in the tech sector unable to predict when the market will recover. There are some incredibly smart people at the helm, so it will be interesting to see how they pivot.