Tara Perkins – The Globe and Mail

Sales of new condos in the Toronto area last month hit the highest level ever for the month of March, according to research firm RealNet Canada Inc., as buyers remained active in one of the country’s most worrisome markets.

Comment: But fewer people are worried every day. I am having more and more trouble finding negative and biased articles to rip apart and rebut.

While the country’s housing market is just digging itself out of a winter slump, sales of new condos in Toronto have been ramping up. That’s despite the fact that Toronto condos are at the top of economists’ and policy makers’ watch lists.

Comment: Sales ramped up because developers launched more new projects. Same as new condo sales fell last year as there were fewer developments and less new condos to buy. When there are more to buy, there are more sales. It really is that simple. But resale condo sales are also up (rising 8.2% in the first half of April). A lot has to do with such drastically low inventory of houses, coupled with their scary high prices, pushing more and more people into condos.

The number of newly constructed units in and around the city that found a buyer last month reached 2,496. That’s more than double the number from a year earlier, and significantly above the average 1,753 units that sold in the month of March over the past ten years.

While developers hailed the sales surge in March as a sign of consumers’ renewed confidence in the market, many experts are still warning of potential problems ahead.

Comment: It is not even renewed confidence, it is the continuing confidence we have seen for 15-odd years now.

The Bank of Canada noted in December that there is an “elevated” number of unsold condos that are still being planned or under construction in Toronto, and that any correction in the city’s condo market could spread to other parts of the housing market and drag down the real economy.

Comment: Urbanation reports that 60% of the 24,130 condo currently in pre-construction at the end of 2013 were sold. Meaning there were around 9,650 pre-construction condos unsold. And until they hit 70-80% sales, they don’t start to build. So there are 60% of unbuilt condos sold and 70-80% of condos under construction sold. How is that elevated? That is pretty much the same ratio it has always been. Never mind the 96.5% of completed and registered condos that are sold.

Toronto-Dominion Bank economists said last month that they expect the city’s condo prices to fall by around 4% this year and a further 4% next year, as a large number of new units are finished.

Comment: They also expected 16,000 condo completions to jump to 35,000 overnight. Their prediction has been disproven any number of times by people smarter than me.

For their part, developers see they are still seeing lots of buyers and some believe that the March spike in sales reflects capitulation on the part of consumers who have been waiting for the market to cool.

Comment: Yeah… how did that work out for you? Waiting is never a good idea… Prices rose 20% and interest rates went up 20 to 60 basis points. That $600,000 house you didn’t want to bid on in 2012 is now selling for $725,000. Blame the media, they kept saying that things would drop. Everyone thought us real estate agents were just greedy liars, trying to push people into houses. When I told people that prices would only rise, they just said I was biased and that they would wait. I wish they had listened to me… I would have saved them a lot of money.

“For the past two years, people have been waiting on the sidelines thinking the market was going to drop and they were going to be able to get these great deals,” said Riz Dhanji, vice-president of sales and marketing at developer Canderel, which is selling units in a building it will be constructing near Yonge and College Streets in the city’s core. “It hasn’t happened, and what’s happening is there is two years of demand of people looking to buy because they see it’s still good.”

Comment: And the media fueled these delusions with their incessant talk of an impending crash. Who are they going to believe? Me or the 10 articles they read that week in big name print media? And who turned out to be right? How much money did some people lose by believing the media and the doomsayer hype?

Looking at the longer term, Phil Soper, chief executive of real estate firm Royal LePage, said on Wednesday that more condos are currently being built – not only in Toronto, but also in Vancouver and Montreal – than are needed based on demographics.

Comment: Wrong. Period. The GTA saw a minimum of 30,000 new households created last year, which means we needed 30,000 new housing units just to satisfy the minimum estimated need. There were only 28,406 new houses and condos built last year. Some estimate there were 50,000 new households created last year… In either case, we DID NOT build enough to satisfy the need.

“We do have short-term overbuilding in our major cities in the country,” he said, speaking of condos. “There just isn’t any way we should be building 44,000 units in these cities, because the requirements … would be somewhere between 26,000 and 32,000.”

Comment: But we did not build 44,000 new housing units in Toronto. We built 28,406. And the mid-point of his estimated need is 29,000 – still more than was built. Even using his math, we are still under building. We are not satisfying the bare minimum need for housing. And as resale listings drop, more and more pressure is being put on new housing. We could probably add another 5,000-10,000 new housing units annually without any major problems.

But he argued that the condo market is not headed for a crash. “Demographic shifts, immigration, preference shifts will – our hypothesis is – drive higher density living in our major cities,” he told an industry conference. “There’s a decided shift in preference in our biggest cities towards high-rise living.”

He pointed to global cities such as Mumbai where families live in condos and suggested Canada’s major cities will follow that trend. About one-quarter of people in Greater Vancouver now live in condos, he said, and buyers are increasingly turning to condos as detached houses become more expensive.

“The same people who have been predicting [a condo market crash] have been predicting it for about 20 years, eventually one of them’s going to be right, but in our estimation it’s not going to happen in the near term,” Mr. Soper said.

Comment: No. Predicting it for 20 years and being wrong 20 times means they were wrong. It means the crash-predictors have never been right. Those of us who said the market was healthy and would continue that way were right. So none of them were right and they will never be right. The Toronto condo market will never crash.

RealNet said that the benchmark price of a new condo in the Toronto area rose 1% in March to $436,898. But condo prices per square foot in Toronto peaked in February and then dipped slightly to $548 in March.

Unit sizes have generally been shrinking in recent years. They ticked up from their February low, to a benchmark level of 797 square feet in March. The benchmark was closer to 900 square feet five years ago.

RealNet president George Carras noted that shifts in the benchmark size could be due to a changing mix in the number of studios, one-bedrooms and two-bedrooms that are being built.

“I think the unit sizes are small as they are now and I think it’s going to be difficult to see them go smaller,” said Bryan Tuckey, chief executive of the Building Industry and Land Development Association (BILD), which represents developers. He added that “we’ll hopefully start to see more two-bedroom units so that families may be able to find a home in downtown Toronto.”

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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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