Toronto Condo Market Booming Again
After years of slow growth, Toronto’s condo market has come roaring back to life. Builders have finished nearly 10,400 new condo units in January, 8 times more than the monthly average over the past decade. The majority of them have been sold. Still, this influx of new units has pushed the number of unsold new condos to a 21-year high.
The latest wave of Toronto condo completions and sales could mark a new upswing after a lull in the market. Sales hit a four-and-a-half year low last fall, while new condo completions had been falling for the past 18 months. Much of the new supply is the echo of a building boom that began in early 2012, when developers started building more than 37,000 new condo units in the city, well above the long-term average of 25,000 units a year. But the January condo boom also reflects the fact that banks and other lenders are returning to the market, now convinced the city’s condo sector isn’t poised for collapse. Under pressure in the past from federal regulators, such as former Bank of Canada governor Mark Carney and former finance minister Jim Flaherty, lenders had largely retreated from Toronto’s condo market, working only with well-known developers and often requiring a high number of presales before they would agree to finance construction.
But officials in Ottawa have grown quiet and banks are now eager to fill holes in their loan portfolios. Lenders are now willing to finance as much as 75 per cent of the value of a project, up from 70 per cent in recent years. Some have also eased up on their presale requirements, typically asking that developers have buyers for at least 65 per cent of their units, confident that builders will eventually find buyers for unsold units. Still, many say the market doesn't appear to be headed toward the speculative boom of the past, when prices rose as much as 9 per cent a year, encouraging investors to flip their units for profit. Prices are growing at half that pace today. Investors are now looking to hold onto their units and rent them out. They have established a price ceiling of about $600 a square foot to keep prices from outstripping rent. January’s boom in new condo completions is likely to prove temporary and the numbers of new units should start to fall later this year.
(Edited from the Globe and Mail)