By: Susan Pigg Business Reporter, Toronto Star Published on Tue May 05 2015
There has been a 58 per cent decline in new condo projects launched in the sought-after former City of Toronto in the first quarter of 2015 as the closely watched sector “moderates” after three years of sales peaks and valleys, according to a new report.
While that “dramatic” decline in new launches is expected to be temporary, it’s actually created sellers’ markets for condos in some prime areas of the city such as the downtown core, downtown east, Midtown and East Bloor, according to a review by condo research firm Urbanation being released Tuesday.
“I know that’s counter intuitive to what most people were expecting for 2015,” said Shaun Hildebrand, vice president of Urbanation. “There’s still lots of demand for new condos in the city, it’s just that there’s not much supply coming out.”
A total of 4,432 new condo units were sold across the GTA in the first quarter, a 10 per cent decline over the same period last year, in large part reflecting a 22 per cent decline in new projects coming to market, says Urbanation.
The decline was especially pronounced in the old City of Toronto which saw just five new projects with 1,436 units come to market. The city accounts for about half of all new condo construction across the GTA.
New two-bedroom units remain in particularly short supply in those prime City of Toronto neighbourhoods, said Hildebrand, now that they’ve become fiercely sought-after alternatives to low-rise houses where prices continue to escalate in the eight to 10 per cent range.
The strong demand for condo rentals is also contributing to a surprising tightening of supply in the old City of Toronto, said Hildebrand. That’s because investors who bought up condos in the preconstruction phase are hanging onto the units once they come to completion and renting them out, rather than listing them for sale.
There are other reasons for the tightening supply in some neighbourhoods, he stressed: It can take two years or more for a condo project to go from land acquisition to launch of sales, and there was a “steep drop off” in developers buying up land for condo projects back in 2013 as sales declined dramatically after 2011’s record year of sales (more than 28,000 units) and fears grew that the market was poised for a correction.
Since then, developers have introduced incentives aimed specifically at selling off those units. That’s contributed to a 10 per cent decline in unsold inventory in the first quarter of 2015 for the GTA, to 17,488 units, according to Urbanation’s research.
A raft of new projects are expected to be announced by the end of this year, said Hildebrand, largely to the east of the core where some eight new projects are anticipated.