Toronto

Toronto New Condo Sales Drop Over 14%, Inventory Pops Even Higher

Remember when people used to line up for a chance to put a deposit on new Toronto real estate? Those days seem very far behind us. BILD and Altus Group data shows new condo apartment sales fell across Greater Toronto, while inventory rose. Don’t worry, people are still paying more for these units… a lot more.

New Toronto Condo Prices Rise Over 21%

The price of a new condo is up bigly. The HPI reached $774,759 in August, up 1.25% from the month before. This represents a 21.8% increase compared to the same month last year. Despite the steep climbs, there’s less sales and more supply than last year.

New Condo Sales In The City Fall Over 14%

Greater Toronto new condo sales were down across the board. Greater Toronto saw 803 new condo apartments sold in August, down 1.1% from last year. The City of Toronto represented 521 of those sales, down a whopping 14.59% from last year. The decline in sales is on top the -57.13% decline last year. The pre-sale market is nowhere near where it was during the golden age of condo sales.

Greater Toronto New Condo Sales

Total new condo apartment sales in Greater Toronto for August, by region.

Source: Altus Group. Better Dwelling.

Greater Toronto New Condo Inventory Rises Over 30%

Greater Toronto new condo inventory is much higher than last year. The number of new condos for sales reached 8,842 in August, up 33.8% from the same month last year. BILD noted that “only two projects” launched, which might make you think that inventory is going to dry up. They also noted last year this time that August isn’t a big month for new developments. Instead, developers prefer to launch in September. Next month’s numbers might be interesting.

Greater Toronto new condo sales are on the slide, while inventory is rising higher. Yet prices for new condo apartments are still making gains similar to last year. If supply and demand was the issue, it isn’t now. This is pure speculative mania.

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29 Comments

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  • Reply
    Patrick W 3 months ago

    That 2016 spike will begin registering around 2019, right in time for hyper supply to hit. Don’t forget, you might have put a few grand down between then and now, but the qualifying rate for you to move in will be much higher than the record low these people signed up for.

  • Reply
    EJ 3 months ago

    What’s the deal with pre-construction mortgages? Since you don’t need a mortgage to “buy,” you just need it before it registers, do you still have to qualify later? Or are these buyers qualified at the original date they buy the assignment?

    • Reply
      Mortgage Guy 3 months ago

      Usually you have to get a pre-approval from a lender that names the project, so it’s not a big concern. There is usually a clause that allows the lender to back out, but I’ve never heard of it being used. Banks are trying to make money from the interest payments, if you’re fine they’ll continue to lend. Plus the LTV is usually lower by the time it registers, since the value of the unit increased.

      • Reply
        Bob 3 months ago

        Except when the LTV goes negative because you purchased at the peak of bubble mania. That’s when the fun begins. Get your popcorn kids.

      • Reply
        @xelan_gta 3 months ago

        Any proof? I’m pretty sure no big lender will hold pre-approval for you for 2-3 years.
        What if the project is delayed for another 2 years? What if you income becomes lower or credit score worsen. What if rates rises 1%+ ?

        You can get pre-approval 4 months before your closing but that’s the maximum.
        What makes it even worse that big lenders normally do appraisals before closing and hopefully it comes above your Agreed Sale Price. Otherwise you’ll have to add cash for the difference to close your deal.

        This is a huge problem and in GTA pre-construction detached segment now.
        Rates are now higher, buyers never planned for B-20 and appraisal comes below the agreed sale price so they have to come up with extra $100-150k in cash.
        Here is just one of example:
        https://www.thestar.com/business/real_estate/2018/07/29/first-time-homebuyers-in-barrie-squeezed-by-falling-property-values.html

        Condo prices are growing for now but if they start declining – watch out.

        • Reply
          Obi 3 months ago

          Pre-approvals for 4 months are only for resale. Developers can get longer timelines, usually through their preferred lender. The whole process is kind of dumb, because both the borrower and the asset will have changed dramatically from the beginning of development to when it registers.

      • Reply
        Grizzly Gus 3 months ago

        “There is usually a clause that allows the lender to back out, but I’ve never heard of it being used.”

        Why even include it in there if it will never be used is the question? Considering prices have continued to rise over the past decade (really the last two decades) there has been no reason for that clause to be used. But its still there just in case. Wonder what could cause them to use it.

    • Reply
      Gabe 3 months ago

      Preapproval means holding the interest rate… not that you are for real approved to get a mortgage…
      Even the bank is waiting for the last couple of days to make their last assessment of the deal. Until the bank advances the funds… everything is a promise on paper…

  • Reply
    Yuzheng 3 months ago

    Some projects are already adding a private second mortgage to help close on the project, so the deposit is only 10%. A second mortgage… to close on a one-bedroom condo. Just think about that for a minute, and reconsider how long you think this can last.

  • Reply
    The Amazing Criswell 3 months ago

    I predict that Toronto condo prices will surpass $1 million in 2019.

    • Reply
      The Amazing Mathmagician 3 months ago

      Why stop at $1 million? Why not $1 billion? If a 66% increase by next year is in the cards, anything is possible.

      • Reply
        Bitcoin For Condos 3 months ago

        Especially now that downtown condo pre-sales are back in the sub $500k range overseas again. I can’t wait for my gains. Bitcoin was nothing compared to what we’re going to make on condos.

        • Reply
          Andrew Jerabek 3 months ago

          I’ve been thinking a lot lately that real estate is the new bitcoin.

      • Reply
        Joe 3 months ago

        >> The Amazing Mathmagician

        I wish there was a way to like comments

      • Reply
        Grizzly Gus 3 months ago

        I’ve heard that both the stock market and real estate is up 1000,000+ % in the past two years in Venezuela……….. as long as you are pricing it from a local currency standpoint. Anything is possible!

    • Reply
      @xelan_gta 3 months ago

      Criswell, that actually happened in Vancouver, condo ave. price surpassed $1M in Jan 2018.
      Do you know where VAN average condo price is sitting now? At $825k, even below Dec-Jan slowest months.
      Isn’t it cool?

    • Reply
      @xelan_gta 3 months ago

      Criswell, that actually happened in Vancouver, condo ave. price surpassed $1M in Jan 2018.
      Do you know where VAN average condo price is sitting now? At $825k, even below Dec-Jan slowest months.
      Isn’t it cool?

      • Reply
        @xelan_gta 3 months ago

        By the way, very few condo investors were able to cash out at the top.
        I did calculations for West Vancouver, only 0.6% of households were able to sell within 5% price difference from the peak ave. price.

        But every condo speculator sure thinks he/she will be able to time the market correctly.

  • Reply
    Greg 3 months ago

    August Inventory of New and Completed Condos in The GTA (**CHMC Data)

    August 2015: 1939 Units, Completed and available for sale.

    August 2016: 921 Units

    August 2017: 205 Units

    August 2018: 106 Units.

    • Reply
      Broseph Stalin 3 months ago

      Most condo apartments recently completed were absorbed in the pre-sale process, so those available for sale from developers isn’t that big of an indicator in this situation. The number of assignments and the fact that 8 listings popped up in the same building last week is a bigger indicator in relation to the speculative demand.

      Agents are suggesting people pretend to live in them for a year and rent it out to save on taxes.

  • Reply
    Scott M 3 months ago

    Usually a bank will qualify you and an interest rate long in advance of closing but with a high interest rate that they say will adjust down at closing, IF rates are lower, so you might see 5% 5 year now on a 2 year from now closing…

  • Reply
    Willy 3 months ago

    Pop or not yet?

  • Reply
    Glass half full 3 months ago

    Seems like comments here want to see Toronto’s housing market collapse .. but we have less than 1% vacancy rates, and recently announced the largest increase in population since 1957:

    https://www.bloomberg.com/news/articles/2018-09-27/migration-drives-canada-s-biggest-population-gain-since-1957

    I would assume Ontario got the lion’s share, and am guessing will continue to see more growth in the next few years.

    From an article I read: “”Even though more units are being planned, sold and constructed, 2017 hit a five-year low in terms of delivering completed units to market. Just 13,513 units were made ready for occupancy in the year, down 24 per cent from the 2016 tally. It extends a three-year streak of declining deliveries from 2014’s high of 21,133.””

    So half a million new people in Canada, and 13.5k “lower” cost condo units completed in Toronto in 2017. Wouldn’t supply/demand dictate that we are not well positioned to accommodate this hyper growth – I suspect prices will continue to increase.

    Toronto is also turning into a new tech hub, with Intel, Shopify, Uber, Microsoft, Sidewalk Labs(Google), Pinterest all announcing new HQ/Offices in Sept alone – these are high paying jobs mostly.

    Speculation I tend to associate with people who expect to time the market, but if you look at long term trends along with supply/demand, I think prices aren’t going to collapse as everyone seems to suggest here (assuming no catastrophic collapse in the financial system – yet we survived 2008 pretty well with significantly stronger financial controls in place now).

    • Reply
      Tutti 3 months ago

      > less than 1% vacancy rates

      Determined by a survey that the CMHC does. Are you having trouble finding a place? Because I have yet to find someone that’s having an issue that isn’t related to cost. Developers won’t build rental units if condo owners are willing to pay a massive premium, and mitigate their PB risk. There’s a lot of information on development cycles, check it out.

      > recently announced the largest increase in population since 1957:

      This seems to be one of the biggest problems. People think that prices are connected to density, but that’s only vaguely true. How much per square foot does housing go up per 1,000 people that move into a city? As much as banks will lend them to buy a house, and as much as they’re willing to risk to risk capital.

      Look at Manhattan. When prices reached a certain point, people just left. The net outflow of population was over 1 million people from 2010 to 2015. To top that off, prices are the same price today as they were more than a decade ago once inflation adjusted. They thought it was demand and zoning, and it wasn’t. It was expectations, which died with a disconnect to local incomes.

      P.S. The low income (refugees) and tax dodging millionaires (QIIP) won’t contribute to the actual economy. The latter just buys homes to

      > turning into a new tech hub, with Intel, Shopify, Uber, Microsoft, Sidewalk Labs(Google), Pinterest

      Those firms are coming to Canada because Torontonians are paid 30% less than their counterparts in the US for the same job. On top of that, they’re also replacing a lot of the existing employment that’s diminished (i.e. where did Blackberry’s employees go?). There’s also the incentive that Canada allows these companies to engage in transfer pricing, which can’t be easily done in the US. That means the tax benefit to Canadians is almost nil, as opposed to those jobs in the US. Sweet deal, right?

      • Reply
        Glass half full 3 months ago

        >> Developers won’t build rental units if condo owners are willing to pay a massive premium, and mitigate their PB risk.

        Developer’s aren’t building PBR specifically because previous government decided it was a good idea to attack landlords by limiting rental increase below inflation. This consequently affected the PB business model leading to many cancellations. How do you build a business plan when your costs are projected go higher than 1.8%, but regulations limit you from increasing prices. The developers are in the market to make money, it is not a social obligation by these organizations. That’s the government’s job to build affordable housing. I can certainly say my home carrying costs have gone up more than 1.8% with utilities alone on an yearly basis. The initial investor sell-off coupled with reduced investment into the PB sector lead to a reduction of rental supply. Instead of doing a vacancy tax to free up these supposed ghost homes which would put more supply onto the market and help alleviate pressure on supply, it was deemed a smarter approach to go after the largest and main source of rental supply – private investors. The pains experienced are a direct result of political posturing.

        >> That means the tax benefit to Canadians is almost nil, as opposed to those jobs in the US. Sweet deal, right?

        So are you proposing that just because we have incentives for foreign investment, that this is a bad thing? What about the taxes collected from the newly created jobs by these companies? What about the spread effect of their spending into local businesses by both the companies and employees? What about the experience gained from these leading organizations to the local talent pool. If you treat this as a zero sum game, there can be no winners.

        >> Look at Manhattan. When prices reached a certain point, people just left. The net outflow of population was over 1 million people from 2010 to 2015.

        Could this not have simply been the result of the worst financial crisis in this generation in 2008? I would assume since NYC was the financial hub of the world, and that many of these jobs disappeared, it may have attributed to this exodus. We are nowhere near where Manhattan is, and when we do get there, this will be an entirely different discussion. I absolutely agree there is plateau when it comes to incomes and prices, but as I alluded above, I believe incomes will actually trend higher with Toronto being a target by the tech industry.

        • Reply
          Tutti 3 months ago

          If you know a large developer, ask them why – it’s not rent control. If you don’t, you’ll get the official narrative they support because they need to elect a government that represents their lobby.

          We don’t have incentives, we have tax loopholes designed to facilitate offshore banking. Look at the changes lobbied in the late 1980s to the tax code. It’s designed to get middle class idiots to take on the majority of debt burden, while allowing tax efficiencies for those that don’t wage earn.

          It could be the crisis, could be people there started doing math. The fact is NYC has a GDP larger than Canada, and housing in 4 of the 5 boroughs is cheaper than Toronto or Vancouver.

          • Glass Half Full 3 months ago

            >> If you know a large developer, ask them why – it’s not rent control. If you don’t, you’ll get the official narrative they support because they need to elect a government that represents their lobby.

            In fact, most developers build PB not to keep and operate, but to sell off after completion. The official narrative has impact on this, because you can’t sell a money losing operation to some of the larger property operators out there. It’s just easier to sell to an end user/investor because they can retrieve their capital back and move onto another project, vs selling a losing money business model.

            >> We don’t have incentives, we have tax loopholes designed to facilitate offshore banking.

            If you look at it just like that, then it’s six of one, half a dozen of the other.

            >> It could be the crisis, could be people there started doing math. The fact is NYC has a GDP larger than Canada, and housing in 4 of the 5 boroughs is cheaper than Toronto or Vancouver.

            Toronto or the GTA? What about Kitchener, Niagara, Hamilton, Oshawa, list goes on… You can buy a full detached house in East Hamilton that needs a little TLC for under 250k. Lets take into account our 30% price differential when it comes to our currency. Let’s face it, this is a global economy now, buyers can come from anywhere not just domestically. You shouldn’t compare Niagara region to NYC, just like you shouldn’t compare Toronto to the boroughs of NYC.

  • Reply
    Bluetheimpala 3 months ago

    Wait, what? Condos are starting to falter but I thought all the inventory is presale by savvy investors who will just rent it out or for house formation. with all of the immigration, jobs, and yada yada, condos are basically golden unicorns. Right? Riiiiight? Grizz called it 6 months ago; condos will get shaky before it goes bonkers. You have about 6 months to get your debt in order. Tick tock. BD4L.

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