Kelly Lapointe – Daily Commercial News

The perception that there are a lot of condominium units sitting fallow in the Toronto Census Metropolitan Area (CMA) is simply not the case, says the director of market research at Urbanation.

“In terms of unsold inventory, the market still hasn’t strayed from historical levels of unsold. In Q3 we actually had 20% of the market that was unsold, that’s really unchanged from where it’s been for a while. It’s a larger market, it’s just simply the same shares haven’t changed,” said Pauline Lierman speaking at Construct Canada’s session “Condominium Market in Toronto: Where is it really heading?”

Overall, there are about 850 units in the market in current registered projects that are unsold in the Toronto CMA.

Comment: So yeah, all that talk about “ghost” condos and empty condos and all the SCARY unsold inventory… is all over 850 units. Yeah, 850. Out of 60,000 being built at the moment.

“Eight hundred and fifty units in a market that is over 94,000 units in size and across a city of over 2.5 million just in Toronto, not even including the suburbs of the CMA, that’s not a lot of units that are actually sitting there unsold.”

Comment: Add in the 85,000-odd resale properties changing hands in a year and we are talking about 850 out of 145,000 new condos and resale properties.

The downtown market is only 15% unsold, compared to a little bit higher levels of unsold inventory in areas like Richmond Hill, Markham and Vaughan, which has seen more development activity recently.

About 10 years ago, the condominium market was about 30% of the area’s new homes, now it is between 50 and 60% of the actual sales and start activity each year in the Toronto CMA. The growth is attributed to condos being much more affordable than detached homes, which have had fewer MLS listings recently, driving up the price tag.

The rental market is setting record activity as more people are moving into the city, especially in the 25 to 34 year old age group. This demographic is not necessarily at the point where they are ready to buy, especially given last year’s reduction in the mortgage amortization period from 30 years to 25.

The reality is Toronto has a really tight rental market as the purpose built rental market is a “very small” fraction of the market.

Comment: And by that they mean “non-existent”. No one is building rental apartments anymore.

“In order for it to come down we actually do need to have supply. Our vacancy rates are nowhere near where they should be right now in terms of demand for people going into the city. That needs to be serviced,” said Lierman.

A little over 33,000 units are scheduled for next year, but Lierman said that is going to be closer to 20,000 units.

Comment: And by that he means more like the average of less than 16,000.

“Once we get past this point where we’ve seen all this record construction occur, we’re actually going to see a bit of a lag and that has a lot to do with the fact that developers have pulled back in the product they’re putting into the market that’s new.”

Comment: All the talk of “overbuilt” and the like forgets that new condo sales this year were about half of what they were in 2011. Which means fewer starts and fewer completions – and fewer unsold units – a few years hence. Thus, supply drops as demand stays steady, or even increases. What do you think that does to prices and sales?

So far this year, 41 new projects have launched, compared to 71 at this time last year. This year has not seen much difference in terms of absorption of new units that come into the market. Of those 41 projects launched this year, about 41% of those units were sold in the first quarter of their opening, compared to 44% last year, said Lierman.

Twenty-six percent of new product in the third quarter went into the rental market, versus 1% or 2% being resold into the market. She said the investor model is coming into play in the rental market.

“What that has done is actually pushed up the range of rental volumes… We’re seeing more premium product come to the market,” she said, pointing to the completion of projects such as the Shangri-la hotel and residences and the Four Seasons.

Looking ahead, developers are slowing down the actual number of units they’re working on “and part of it has to do with they simply have so many different projects on their slate right now that they’re trying to get through and complete these developments they have before moving forward,” said Lierman.

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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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