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Unsold condos pile up in Toronto, hit 21-year high

JamieSturgeon – Global News

As far as statistical outliers on charts go, the Bank of Montreal produced a dandy on Tuesday that should get some attention from condo market watchers in Toronto.

According to BMO economist Sal Guatieri, there were 10,368 condominiums completed by builders last month in Toronto – a record high. That’s a “whopping” eight times more than the average for the past decade, with only two other months coming even close to that total, in the spring of 2011 and summer of 2012. And even then, not that close.

The BMO economist chalked last month’s record completions up to “construction delays” that had builders playing “catch up” to finish units that were sold in 2011 – a record year for sales, Guatieri noted.

Comment: Right, so they should have been more spread out, but delays caused them to all end up completing in January. Without delays, 2014 might have had 25,000 completions (instead of 20,804) and January only 6,000. Still a lot, but we do need these things in context.

Unsold Condos in Toronto
Rising high

The burst in completed units in Toronto comes as other Canadian cities confront mounting inventories of unsold condominiums. Centres like Winnipeg, Montreal and Moncton are grappling with surpluses, a report from the Globe and Mail said Tuesday.

In Saskatchewan, the number of unsold housing units in Regina and Saskatoon hit a 30-year high, according to the report, citing the Canadian Mortgage and Housing Corp. The majority of them condos.

In Quebec, Montreal had a backlog of nearly 3,000 unsold condos last year.

Comment: Almost double Toronto’s inventory.

Warning call

In November, CMHC’s chief economist warned condo builders in certain big cities they need to sell more existing units before planning new ones. Specifically, Toronto and Montreal were singled out.

“The number of units under construction is elevated in these centres,” the CMHC said. “This could develop into overbuilding if these units are completed but not sold.”

In Toronto where demand remains strong, most of the newly completed units have already been sold, Guatieri said, but the burst in completions has left 1,602 units on the market — a 21-year high.

Comment: Now now, again we need context. Take the almost 21,000 completions last year and 10,000-odd in January. That means only 1,600 of 31,000 did not sell. Of completed condos. Add in another 20-25,000 new condo sales last year and you are talking about 1,600 out of 50-55,000 – less than 3%. The ratio is in line with historical averages, it is just that with more condos being built, the absolute number is rising. Sure, 3% of 10,000 is more than 3% of 1,000, but the ratio does not change. But the 97% that are sold, that is what we need to concentrate on.

“This will slow the increase in new condo prices,” the BMO economist predicted.

Comment: No, it won’t. Those are large units (which are hard to sell), units that have bad views, ones where the original buyer backs out for some reason. There are any number of reasons why those units did not sell. And when you have the overwhelming majority selling, there is no reason for the developers to lower their prices. Even if they give those last 1,600 units way for free, they have made their money and are on to the next project. Why is this even a story? Trying to make bad news out of nothing… as usual.

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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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Summary
Unsold condos pile up in Toronto, hit 21-year high
Article Name
Unsold condos pile up in Toronto, hit 21-year high
Description
The BMO economist chalked last month's record completions up to "construction delays" that had builders playing "catch up" to finish units that were sold in 2011 – a record year for sales.