Toronto condo projects face delays as sales weaken

Toronto’s condo market is taking it on the chin, though that compares to a strong 2011.

Condominium sales in Canada’s biggest city plunged 30 per cent in the third quarter from the second, leading developers to delay launching projects, Urbanation Inc. said today.

Sales of new condos fell to 3,317 in the latest quarter, the research firm said. In the first nine months of the year, sales slipped to 14,156, and are on track to close out the year with a 35-per-cent decline from last year’s record level of 28,190.

“With slowing sales and a record level of unsold inventory in the market in the second quarter, condominium developers reacted quickly by delaying their project launches, especially in the ‘416’ area,” said executive vice-president Ben Myers, referring to one of the area codes used in the Toronto area, the other being further from the city core.

“Just five projects launched in Toronto in Q3-2012, as developers choose to review their pricing assumptions and unit mix.”

Resales also sank in the third quarter, by 32 per cent to 3,413 from 5,050 in the second quarter.

“The change in the mortgage insurance rules may have forced many buyers to settle for smaller units then they had previously desired,” Mr. Myers said, referring to the latest round of restrictions from Finance Minister Jim Flaherty that took effect in July.

“The number of resale transactions for units priced over $400,000 fell 40 per cent compared to last quarter, while there was a 38-per-cent quarterly drop in units traded over 1,000 square feet.”

Slowing sales in the city, where observers, including the finance minister, feared a condo bubble, are taking their toll on projects.

“The number of unit completions in 2012 are well below our forecasts, as construction delays have pushed back occupancy on a number of projects,” said Mr. Myers.

“The average project that completed construction in 2012 took 3.85 years from sales launch to occupancy. Compare that to 2003, when they average took just 2.68 years for a similarly sized project (205 units vs. 197 units).”

Unsold inventory in the city had reached a record 18,123 in the second quarter, but that has since slipped to 17,182.

And, noted Urbanation, starts have eclipsed completions for the eighth quarter in row, leaving a record 207 projects, with more than 56,300 units, under construction.

“The 28,000-plus completions next year could add as many as 14,000 new condominium rental units to the Toronto [census metropolitan area] via private landlords, which would represent a whopping 25-per-cent increase in condominium rentals in the metropolitan area,” it added.

Source: Michael Babad, Globe and Mail

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