“New cycle” of condo sales coming as developers see confidence returning to market

Susan Pigg – Toronto Star

The GTA new condo market is expected to see a slow, steady rebound in sales through 2014, says market research firm Urbanation.

“I think we’re entering into a new cycle in terms of new condo sales,” says Shaun Hildebrand, senior vice president of Urbanation and a long-time market watcher. “We’re moving out of this volatile period and entering a new period of stability.”

Almost 4,300 new condos sold in the fourth quarter of 2013, the best quarter in 1½ years, Urbanation says in a state of the market assessment released Friday.

Comment: After the worst third quarter in years. Just goes to prove that the new condo market, and the new home market in general, is all over the place.

That brought total new condo sales to 13,797 for 2013, almost 1,000 more units than the market research firm had expected, but still significantly lower than the historic average of 19,000 units over the last five years, and the extraordinary 28,190 sales in 2011.

Comment: But take out the record year and the average falls to 16,700. Just saying, one crazy year skews the average.

A pickup of sales in the last half of 2013, coupled with growing signs of consumer confidence, has developers gearing up for the launch of new projects, largely concentrated in the sought-after downtown core, close to transit lines.

Urbanation anticipates 15,500 sales in 2014, but largely at flatlined prices: The average square footage cost across the GTA of a new condo was $543 as of the end of 2013, up just 1.3%, year over year, and significantly below the 6% growth averaged each year since 2005.

Urbanation also anticipates more deals from developers keen to clear the record backlog of 19,004 unsold units that remained as of the end of 2013.

Comment: Unsold but not built. Built and unsold is less than 1,000. I would be curious how many have sold in the projects with 19,004 units left to go. It is hard to evaluate the number without context. Which is usually the point of these stories, lots of scary numbers without context so you cannot determine what they actually mean. Sure, 19,004 unsold condo sounds scary, but if they are part of projects that have sold 200,000 units, then the meaning is very different.

About half those suites are in projects where construction hasn’t even started, said Hildebrand. Just over 800 are actually sitting empty in buildings that are occupying or registering, while 8,130 are in projects just being built.

Comment: So the news here is that sales centres have condos to sell. So what?

“I think we’re going to see a strong first half (of 2014) and a lot of project launches that generate a lot of interest,” said Hildebrand.

“Confidence is starting to improve and investors are starting to come back into the market. They are recognizing that the market hasn’t crashed as so many people expected it would in 2013 and the resale market remains stable.”

Sky-high house prices, and a shortage of low-rise homes in the City of Toronto in particular, is also likely to drive more buyers to condos this year, he noted.

About 19,000 condos, 86% of which were sold two or three years ago, are expected to occupy this year and about a quarter of them will be rented out by investors, as demand for new condo rentals, which hit a record last year with 19,628 rented via the MLS system alone, is expected to remain strong.

Rents are also so strong — although rent increases that have averaged 4% the last couple of years slipped to 3.7% in Q4 of 2013 — that investors seem to be hanging onto their units for the long-haul: Just 4% put their units up for sale in 2013, says Urbanation.

Comment: And that pretty much sums up the strength of the Toronto condo market.

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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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