Jamie Sturgeon – Global News    

Even close watchers of Toronto’s condo explosion over the city’s skyline in recent years were struck by the sheer volume of new units completed in January.

Builders finished a staggering 10,368 condominiums to start 2015. And while the majority of the new units were sold well in advance, there were still more than 1,600 that weren’t – a 21-year high, according to experts.

Comment: That wasn’t 1,600 out of the 10,368. It was 1,600 new condos that were complete and ready for occupancy, but not sold. It includes all 21,000 condos built last year. It is a completely normal historical percentage, but with so many completions, the total number is up. To put it in perspective, those condos were available in January, we don’t have updated numbers since then. So the data is old. And it you take the 31,000 new condos completed January 1st 2014 through January 31st 2015, plus the 40,000-50,000 resale condos in 2014, that gives us a good 70-80,000 condos. Plus all the new ones sold, another 20,000-odd sales. So we are trying to make 1,600 out of 100,000 into something major? Really?

While market watchers chalk up the January surge to the completion of one or two big projects, the tidal wave of completions obliterated the previous single-month record. It also helped underscore the frenetic pace of building that’s occurred in recent years in Toronto, a city whose housing market is building up seemingly as quickly as it is out.

Comment: Sure, and as condos continue to make up more and more of the real estate landscape, more records will be set. More and more are sold, then built, then completed. There will always be more and more and more.

So far, supply has continued to be outstripped by demand, leading to a comfortable, steady rise in prices throughout the city’s ongoing property boom. But, that trajectory for condo prices may now quickly be changing.

Comment: Note that it MAY be changing. Might. Could be. Possibly. That is NOT a certain statement. And it is not really true.

Demographic shift

Robert Kavcic, an economist at Bank of Montreal, said a mounting supply of condos in Toronto coupled with longer-run demographic shifts could serve to suck the wind out of prices for years to come.

Comment: But there is no “mounting supply”. There are only resales, which are built and paid-for. Then there are the new ones, which are over 98% sold by the time a building is complete and the condo corporation is registered. There are maybe 2-3% of new condos not sold at completion. But they sell in time. So almost 100% of new condos sell. Where is this “mounting supply”? You might as well talk about houses that are listed and don’t sell. Just as small a part of the overall market and just as meaningless.

Growth in the 25-to-34 year-old age bracket – a.k.a. first-time buyers who generally fit the bill of your average condominium purchaser – is decelerating, Kavcic said in a new research note on Wednesday.

Comment: Then fewer projects will be launched, fewer condos will sell, fewer will be built. So what? It is not like developers spend $100-million to build a giant condo and then hope people buy them. There are a lot more smaller projects, boutique buildings in older neighbourhoods. Giant towers will have their day and then focus will shift to more family-friendly and neighbourhood focused developments.

While completions wont likely touch the lofty 10K mark reached in January again this year, experts say the crush of condo projects that were started in 2011 or so are now nearing the finish line. Condo completions will be elevated throughout the year.

Prolonged period

February’s numbers seem to confirm it, with 4,300 units finished in the month – which would have been the new record if not for January.

Comment: 2011 was a huge year for new condo sales. It was inevitable.

“Combining these supply and demand fundamentals suggests that Toronto condo prices could be in for a prolonged period of stagnation, or very sluggish growth,” Kavcic said.

Comment: They have been rising slowly for years now, this is not new. Supply is matching demand, there is no major upward pressure on prices. They are going up maybe 4% annually, double the rate of inflation. Materials and construction costs account for most of that increase. And rising land costs.

The upshot, at least where it concerns other homeowners or would-be ones, is that the trend will further widen the already large gulf that’s opened up between single-family homes and starter condos, Kavcic said.

In contrast to the relatively pedestrian 10% jump in Toronto condo prices since 2012, according to BMO, single family homes have surged 25%. That’s pushed the average selling price of a detached property into seven-figure territory ($1,040,000) in February – a high price tag that’s only getting higher, Kavcic predicts.

“Detached home prices [will] outperform through the end of the decade,” the economist said, “barring a major external shock.”

Comment: Supply and demand. They match in the condo market, keeping price growth in check. Houses have 10-20 buyers for every house, throwing the balance way off. This is Grade 9 Economics class, people.

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

Laurin Jeffrey is a Toronto real estate agent 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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