TheToronto condo market is starting to cool off....or is it?
The level of condo development in Toronto has been significant in the last few years. For the most part, this development in the downtown core has followed population patterns and anticipated demand. New office/business space and new business is also anchoring that population in the downtown core with jobs/careers. Here are some numbers:
(i) Approximately 458 projects are currently selling (underway) in the GTA
(ii) An estimated 18,000+ units will likely be sold this year (down from 29,000 in 2011)
(iv) Construction resources are basically at maximum capacity right now.
(v) There will be a significant number of units (approximately 30,000+) expected to be up for occupancy in 2013-2014. But there is a very high likelihood of delays in closings resulting in closings being spread out over the 2 years.
(vi) Investors have played a significant role in part of the demand, with some larger projects at 70%+.
(vii) Rental rates are expected to be below 1% in 2012 (versus 1.4% in 2011).
(viii) Demand for condos is still good, with nearly 56,000 new household formations (wanting the urban lifestyle) expected to have hit GTA in 2012.
Overall, it looks like the market is set to ease materially, although a complete collapse is not expected.
Traditionally, developers/builders have catered more to investors. Investors can provide positive dynamics: (i) they have higher deposit rates (20%++) (ii) they tend to manage inventory and sell over time (iii) there are very few purpose built apartments coming on line so they meet new rental demand.
Demand for condos is still good, with nearly 56,000 new household formations (wanting the urban lifestyle) expected to have hit GTA in 2012. Overall, it looks like the market is set to ease materially, although a collapse is not expected.
However, there seems to be a significant blind spot with respect to investors. There doesn't seem to be a clear understanding as to who these investors are and how small or big they are. It also seems highly unlikely to that lenders have a clear view on the investment content in their books either