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.”

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.

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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.
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