Toronto condo market meeting demand: expert
KELLY LAPOINTE
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 per cent 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.
“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.”
The downtown market is only 15 per cent 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 per cent of the area’s new homes, now it is between 50 and 60 per cent 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 40 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.
“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.
“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.”
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 per cent of those units were sold in the first quarter of their opening, compared to 44 per cent last year, said Lierman.
Twenty-six per cent of new product in the third quarter went into the rental market, versus one or two per cent 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.
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Well, condo is still an excellent bet, so said the guru.
What are you waiting for … Buy.
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