Jamie Sturgeon – Global News

Scores of cranes remain perched atop unfinished residential towers across Toronto’s gleaming skyline, but condominium sales are coming down.

The country’s largest and most active real estate market – and source of concern for the Bank of Canada and others because of an investor-led condo boom – sold 3,903 new high-rise units this spring.

That’s an 18% decline compared to a year earlier, according to Urbanation, which tracks the industry.

Comment: And how many fewer units were for sale? Without that data, that stat is meaningless. If there were 50% fewer units for sale, then that shows more interest and higher sales per unit available. If there are 20% MORE units for sale, with 18% fewer sales, that is a worrying trend. But we do not have the information to determine what it all means.

The number of so-called active units meanwhile ticked up to 92,398 a fifth of which are unsold. Active units include condos that are awaiting or are under construction, and those ready to be occupied.

Comment: So we are pretending to freak out because 20% of new condos are not sold? But that means 80% are sold. And we are talking about projects that opened yesterday that have only sold 50 of 300 units. We know that cranes go up once 70-80% of units are sold, and buildings tend to be 90% once they are complete. So these numbers are nothing new. In fact, the 10-15 year trend has seen buildings at 89-90% sold when they complete. Which is right where we are now. The historical trend has been for condos to get their construction financing at 70% sold – a number we are at or above. But yet, every month or so, this “AY, run for the hills, 20% of condos are not sold!!!” story comes out somewhere and a huge deal is made of very little. Yes, the absolute number has risen, as the total number of condos being built has risen. Just as 20% of 1,000 is more than 20% of 800. But as condo building slows down, as it appears to be doing this year, that absolute number will also begin to fall. We went from 20% of 500 to 20% of 1,000 and now will likely drop to 20% of 800 or so. Yes, 100 is less than 200 which is more than 160 – but they are all still 20%.

That glut has developers racing to cut would-be buyers better deals, said Shaun Hildebrande, senior vice-president at Urbanation.

Comment: Right… I have not seen these cut-rate deals. Condo builders have offered incentives from time immemorial. From free parking to granite counters to upgraded floors. This is not new. Nor is it news.

Those deals combined with interest rates still hovering near record lows are expected to entice more buyers back to the market for the balance of the year, according to the research firm.

Comment: Interest rates have been rising of late, how is that an incentive? And the condo perks are the same old same old we have seen for 20 years.

“Pricing at new projects has become more competitive, which will continue to attract more attention from buyers,” Hildebrande said by phone.

Comment: By that they mean prices are not rising as much as other housing products. And new condo sales suffered the same as the rest of the market for the past year, because of the new mortgage rules introduced last year. Give it another quarter or two and let’s see what happens.

“Sales are expected to show further improvement in the second half [of the year].”

Having new buyers snap up that excess inventory may ease fears of a potentially sharp correction to come in the market place – something the Bank of Canada expressed concerns about earlier in the summer.

Comment: And, as with all other expressers of concern about a correction, they were wrong.

“If the upcoming supply of units is not absorbed by demand as they are completed over the next 12 to 30 months, the supply-demand discrepancy would become more apparent, increasing the risk of an abrupt correction in prices and residential construction activity,” the central bank said in a mid-June report.

Comment: As I have said 314 times now, when a building is complete and those units come online, 90% of them are sold. Why so many people imply that condos are built first and then all offered for sale, I do not know. We all that is not the case. So with only 10% of units unsold, even if every single condo under construction right now were to complete tomorrow, that would add only 9,240 units to the GTA market. That is one month worth of sales, big whoop. Not ideal, but certainly not the catastrophe many say it would be. And that is only if magic happened and every hole in the ground and concrete skeleton were turned into a finished princess condo. Truth is that they will be spread out over the next few years. Let’s say 3 years, which is probably a shorter time frame that is realistic. But even so, that is 36 months, less than 260 every month. That is what the media is trying to cause a scare over, 256.67 condos per month. I know I am not scared of that…

The report warned that a plunge in condo prices could “spread” to other areas of the economy.

Comment: Only IF condo prices fall, and IF they plunge, they it MIGHT spread. That is a lot of maybes my friend! IF I grow another 18 inches, then MAYBE I could play for the Raptors and then they MIGHT win the NBA championship. Same chain of logic, same likelihood of happening.

Still, the bank cautioned that that scenario is not what it is predicting. In fact, it still expects the correction in the housing market to go smoothly.

Comment: So why are we talking about something that they DON’T THINK WILL HAPPEN? Sigh…

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Contact Laurin Jeffrey for more information – 416-388-1960

Laurin Jeffrey is a Toronto Realtor with Century 21 Regal Realty. He did not
write these articles, he just reproduces them here for people who are
interested in Toronto real estate. He does not work for any builders.
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