New condo sales steady, resale market softens
By on Dec 15, 2008
Urbanation Editor & Executive Vice President, Jane Renwick said, "The Toronto condo market is showing signs of softening, indicating that the 'go-go' market of the past few years has returned to more normal levels, as Canada feels the effects of a so-far-mild slowdown."
"Compared to the steep declines in the U.S. housing industry, and turmoil in U.S. financial markets, new condo projects and the financial resources backing them in the Toronto Region (416 and 905 areas) remain stable," added Ms. Renwick.
"Unlike the constant, hopeful refrain in the U.S. that 'the fundamentals are strong', that fundamental strength actually appears to be real, though mildly reduced from last year," she said.
In Q3/08, 3,992 new condominium apartments sold across 287 high rise projects in the Toronto CMA, which was in line with the sales volume of Q3/06. The Toronto development industry appears to be on track to sell about 16,000 new condo units in 2008, down from the record-breaking 2007, but on trend with both 2005 and 2006.
A total of 15 new condo projects opened in Q3/08, and sales were strong, as 47 per cent of the 4,449 new units released were sold during the quarter. This compares with the historic norm of 35 to 40 per cent.
Added Ms. Renwick, "Builders are likely to find the conditions for beginning new projects less enticing than they were during the boom. Consumer confidence is more uncertain, equity requirements and borrowing costs are higher, banks are skittish and the increasing inventory of unsold units may hold some developers back."
"So far however, the positives in Toronto and the 905 continue to outweigh the negatives. Urbanation's analysis of industry data leads to an expectation of as many as 24 new project openings in the fourth quarter (5,904 units), 18 (75 per cent) in the 416, and 6 (25 per cent), in the 905. In fact, 15 of those openings already occurred in October 2008," said Ms. Renwick.
Pricing for new condos in Q3/08 was up a modest 2.5 per cent from the previous quarter, from $396 psf in Q2/08 to $406 psf in Q3/08.
Uncertainty and anticipation of at least a mild economic slowdown in Ontario are having some effect on the optimism of Toronto condo buyers in the resale market as well. But the Toronto market is still being strongly driven by positive forces. These include: continuing migration into the City, a maturing, financially sound buyer population, affordable pricing, and low interest rates, supported by responsible financial institutions.
In the resale market, 3,753 units across 1,004 condo apartment buildings changed hands, 10 per cent less than in Q3/07, but 11 per cent more than in Q3/06.
"The increased volatility in the overall market, comparatively moderate though it may be in Canada, leads Urbanation to recognize that the total number of resales in 2008 could drop from the predicted level of 14,500 to 13,500 units. Given the current market conditions, annual sales in both the new sale and resale markets may vary by as much as 10 per cent from earlier 2008 predictions," Ms Renwick said.
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Urbanation is Canada's leading condominium market research company. Since 1981, Urbanation has analyzed the Toronto condominium market, publishing the 'industry bible' "Urbanation's Condominium Market Survey". This quarterly Report tracks new, resale and future condominium apartment projects. Urbanation also provides the development community with essential consulting services, which include site specific market studies, surveys and focus groups.
