Toronto real estate is about to be hit with a flood of supply, while prices are in a precarious situation. A massive number of pre-construction condos go on sale over the next two months. The increase in supply won’t provide immediate relief to perceived housing pressure. It does however have the potential to soften future condo prices. Let’s see how big the number of pre-construction units for sale is, in contrast to demand.
Toronto Is Getting Almost 17,000 Pre-Construction Units
A metric s**t ton of condos will be up for sale over the next two months. Almost 17,000 condo pre-construction units will go on sale according to condos.ca. The press release said they have “never seen this many projects launching in such a short span of time.” They believe the number of units about to hit the market is because the “condo market is killing it.”
Left your Realtor to english dictionary at home? That means developers are scrambling to realize gains on high property values. When they all scramble at the same time, you should start wondering what’s the rush? Typically developers look to maximize gains (i.e. sell at the greatest value of land). This many developers competing against each other is… strange. Unless they all decided land is reaching peak values for the near term.
How Does This Contrast Population Growth?
Census 2016 numbers show Toronto’s population experienced a massive cooling. Toronto CMA grew at an average rate of 68,995 people per year from 2011 to 2016. Growth is better than shrinking, but claiming Toronto’s population is booming is not true. The growth observed in the most recent Census was the slowest pace of growth since 1991, over 26 years ago.
Oh Yeah, About 1991…
Trying to figure out what was happening around 1991? Naughty By Nature released OPP, and Toronto was in the middle of a flood of condo supply. Over shooting supply led to a mess known as the only significant real estate crash in the city’s history. Is that what’s happening this time? No one knows for sure, but we can compare the upcoming inventory to population growth.
Assume Toronto grows at the same annualized rate it has over the past 5 years, a tough but not impossible fete. The average household is 2.4 people, but let’s drop it to 2.3 to accommodate the increase in single person ownership. The units for sale over the next two months will accomodate over 56% of a year’s net population growth. This assumes the *whole* net population increase buys a condo… which is always the first thing an immigrant does when they move to a new city, right?
While it’s impossible to know for sure, condo prices don’t look like the sure thing they were 10 years ago. This supply won’t be built for another 3-7 years, so don’t expect it to drop prices immediately. In my opinion, developers will have a tough time getting all of the units absorbed by buyers at a premium price. Pre-construction prices often act as a condo futures index. Softness in the price points today, are often tomorrow’s resale weakness.
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Awesome article, love the OPP reference.
All i’m imagining is Shao Khan yelling “It has begun” as prices for bachelor/1/1+den under $600,000 get slammed…I suspect there will still be a healthy appetite for the $1,000,000+ multi-bedroom units.
We’ll be fine. Keep calm and don’t undercut your equity in haste. Rent or stay where you are. Toronto is magical.
The statement “condo prices don’t look like the sure thing they were 10 years ago” indicates that the writer is unfamiliar with the condo market. Ten years ago NOBODY in Toronto thought condo prices were a sure thing. Until the past 3 years, condos were seen as not only a last choice for real estate buyers, but there was tremendous fear that the condo market was over-supplied. Toronto (and Canada) have never been condo-friendly markets until a couple of years ago and it’s only because other forms of real estate became too expensive for the average buyer.
I disagree.
Consumers didn’t move to condos due to being priced out of other forms of real-estate.
There is a move towards more urban, connected communities with amenities within walking distance.. Look at how the suburbs like Mississauga and Brampton are trying to urbanize their downtown cores as they watch their future move east to ‘the city’. Mississauga is redeveloping TWO major areas in fact.
What the author was trying to imply, in my opinion, is 10 years ago when demand and prices were low, in a large urban city the only direction for prices to go was up. Now, with new supply coming online and tighter lending standards, there could be a correction and we can’t say for sure that condos will continue to appreciate..
I think this is long overdue.
hahaha… 10 years ago, we did not have Chines stock market crash LOL… look at 2015-2016 real estate markets in Toronto and Vancouver and you will see clearly that what prevented our real estate to go down was: A) 2008 bail-in by CHMC B) Chinese investors influx. Chinese are in debts at 250%.. Canadians are in 170s’%
you’re retarded
Condos are not going to continue to appreciate 20% or more year-over-year, that’s for certain. They will reach their cap just like single detached homes have. If that’s what the article was implying, I think that’s an easy conclusion to draw, with or without these new pre-construction launches.
Given the pullback of purpose built rental buildings (Allied & RioCan cancelled their plans for rental condos and decided to sell them off, so it is safe to assume more will follow), there is a serious undersupply of rental properties and the only real answer to that right now are investor-owned condos for rental purposes as the City of Toronto can’t afford to add rental properties themselves.
Anyone in the Downtown Toronto rental market knows that there is heated competition for rentals, mostly in the April to October months where there is the most tenant mobility. Prices shot up this past summer, a combination of demand and a by-product of the introduction of the Ontario Government’s Fair Housing Plan, putting rental increases at the lower of CPI Index or 2.5%. The latter has made it unattractive for developers to get into the rental game because they can’t increase rents according to market prices should a tenant wish to stay long term.
A fact I learned recently is that the Millennial generation is even larger than the Boomers in numbers and they are still entering the workforce. Culturally, Millenials want to live and work in the same area, most of which are in urban centres. This means we have a future driver for rental properties, as well as condominiums for end-user purchases.
When it comes to population, 69K per year in growth means about 25,000 to 30,000 vacant households per year are needed. Adding 17K in new housing launches this fall that won’t be ready for an average of 4-5 years indicates to me that we still have a supply issue in Toronto because these new starts are happening sporadically.
We just can’t build fast enough to keep up with future housing demand.
OPP, you should have quoted the better song “Everything is Gonna be alright” to all those 5% down indebted piggies. Keeping up with the Jones, Wongs and Mohammeds is so out of style now……=P
It was a historical reference.
You probably get easily confused.
The ‘fire’ in the sky is the sun and it doesn’t ‘die’ every day, it just goes to the other side of the planet…shoot, you probably think the world is flat…I don’t have time for that. Close your eyes and breath…”Everything is gonna be alright”.
really? talking smack? lol you got me wise one…..you got me….
Stupi author i have ever seen, saying the market is flooded with condo and condo prices are not going down 3-7 years. Ultimate fool news…………………………
Mikey, the one who is “stupi” can be the one expressing this way! The author writes articles based on stats! It’s not you who has to judge or make such silly comments.
The things is, there is supply at the moment, and this is true. In case you are a realtor, I don’t feel sorry for you at all. The prices are high anyways. Enjoy it, and keep running and earning until it’s\if still possible, and let’s not forget – a Condo is not a Detached!
It feels, the buyer has finally gotten smarter a bit. It all remains to be seen.
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[…] people per year for the past 5 years. Between October 1 and the end of November, they’ll see 17,000 new condos hit the market in the city proper. This excludes suburban condos, where a lot of those 65,000 people will move to. […]
[…] Basically, we have enough housing in the pipeline for up to two years. This excludes the almost 17,000 pre-sale units hitting the market between October 1 to November 30, which won’t hit the market for three years. We’re also not even talking about the additional […]
A major reason why we’re seeing a significant influx of pre-con condo supply versus other forms of real estate is because rising prices have given many buyers no other option. The demand for condos will continue to remain high as they provide the only viable entry point into the Toronto/GTA real estate market for many…
https://trebl.net/blog/are-pre-construction-condos-a-good-investment