Urbanation Reports Record High Sales Cap 2011
What Does 2012 Hold for Toronto’s Condominium Market?
Urbanation Inc., the leading source of information and analysis on the Toronto condominium market since 1981, released its Q4-2011 market overview.
The 7,226 new sales in Q4-2011 were not only the highest of any fourth quarter on record, they helped the Toronto CMA reach a record high of 28,190 new condominium apartment sales in 2011. This caps a truly unprecedented year – one that smashes the previous record of 22,654 sales set in 2007 by an astounding 24%.
Urbanation tracked a total of 357 condo project in Q4-2011, 330 active projects containing 81,274 units, with 5,464 units in the 27 sold out (and not registered) projects.
But with the record year 2011 behind us, industry participants and purchasers are asking: What comes next? Are the numbers a cause for celebration or for concern?
“The more successful the condominium market is in Toronto, the more reports surface warning of oversupply or a correction in prices,” says Ben Myers, Urbanation Executive Vice President and Editor. “Because the underlying realities of the market are constantly changing, in this report we wanted to take off our ‘rose coloured glasses’ and review potential factors, both economic and psychological, that could derail the high-rise market in Toronto.”
the Toronto condo market has seen very few resale projects experience a lot of units being flipped at registration, meaning purchasers are likely long term, hold-and-rent investors
Urbanation identifies speculative purchasing, lack of financing and herd behavior as risk factors for a market correction. Regarding speculation, the Toronto CMA has seen very few resale projects experience a ‘dump’ of units at registration, meaning purchasers are likely long term, hold-and-rent investors. A 2011 survey of Urbanation subscribers and data providers shows that only 57% thought that more than 10% of condo suites were being assigned pre-registration. That’s a drop from the 70% of respondents who felt that way in 2010.
The 2011 survey also showed that there was little concern with the level of international activity in the market, which the majority of respondents felt is responsible. Leverage was also not identified as a major concern, leading Urbanation to believe that condominium investors are well capitalized.
Based on the responses to Urbanation’s latest survey, the biggest concern going into 2012 is that unit prices are rising too quickly (according to 53% of respondents, up from 34% who expressed the concern about pricing in 2010.)
The sold index pricing in the new condominium market rose 2.7% in Q4-2011, to $509 psf, the biggest quarter-over-quarter jump since Q2-2010. Annually, prices are up 8.2% over Q4-2010 ($471 psf).
With a sold price index of $509 psf and an unsold index price of $557 psf, the Toronto CMA may be experiencing a balance in supply and demand.
While Urbanation’s 2011 survey showed respondents had less trepidation in 2011 regarding a potential oversupply than there was in 2010 (21% versus 6%), unsold supply increased to 13% in Q4-2011, the largest quarter-over-quarter jump for the Toronto CMA since Q2-2008. The 14,969 unsold units at the end of Q4 represent the highest level recorded since the mini-recession in Q1-2009 and an 8% increase over Q4-2010.
While the key statistical indicators that Urbanation reviews quarterly for this publication are slightly less rosy, we anticipate that the market will remain strong in 2012, with over 20,000 new condominium sales, while our survey respondents believe the results will be slightly lower, with 41% predicting sales between 17,500 and 20,000. It is worth noting that, in 2010, 39% of respondents forecasted 13,000 to 15,000 new sales for the Toronto condominium market for 2011 – half of the final record breaking result.
Contact the Jeffrey Team for more information – 416−388−1960
Laurin & Natalie Jeffrey are Toronto Realtors with Century 21 Regal Realty.
They did not write these articles, they just reproduce them here for people
who are interested in Toronto real estate. They do not work for any builders.