Sales plummeted by 55 per cent in the first three months of 2013 over the same period last year as developers held back on new project launches and took a wait-and-see approach in the face of a softening market and a climbing inventory of condos for sale.
A total of 2,728 new units were sold to the end of March, down 29 per cent just from the final three months of 2012. That’s less than half the 6,070 units sold in the first quarter of 2012, when the condo market was starting to come down from a record year of sales — 28,190 units—in 2011.
“Developers have been very disciplined. There were barely any new project openings and they are being very selective in what they do launch,” says Shaun Hildebrand, senior vice-president of Urbanation , a condo market research firm which released its state-of-the-market report Monday.
New project launches so far this year are the lowest since the fall of 2009 in the wake of the Great Recession.
“Given the sales numbers we saw in 2011 and up until the early part of 2012, which were on fire, that type of momentum had to give,” said Hildebrand. “The rebalancing now taking place is beneficial for the longer term stability of the market.”
While most of those 2,728 new units — some 79 per cent — already have buyers, the inventory of unsold units in new projects climbed to 18,845 in the first quarter, a 21-per-cent jump over a year ago, Hildebrand notes.
Most of those unsold units, about 64 per cent, are in buildings still in the pre-construction sales phase, meaning they have yet to be built.
Price gains for new condos, which have averaged 6.4 per cent annually over the past decade, have slipped significantly. The average index price of a new unit was up just 2.5 per cent in the first quarter, year over year, to $533 per square foot. That’s the same average price per square foot as that for resale condos, says Urbanation.
But the market has avoided, so far at least, the major collapse in prices that many housing watchers had been anticipating since last summer, when the market began softening in the face of the euro crisis and the tightened mortgage lending rules imposed by Ottawa, which forced many first-time buyers to the sidelines.
The big fear was that panicked investors, who are believed to account for at least 30 per cent of new condo purchases, especially in Toronto’s core, would flood the already shaky market.
Instead most seem to be renting their units out. So far they’ve been able to command hefty rents, especially from the growing number of young professionals keen to live downtown. But Hildebrand says those rents are likely to flatten out over the next couple of years — along with a levelling out of new condo prices — as more new units come on stream to compete for tenants’ dollars.
On paper, occupancy is scheduled for some 26,500 new condo units across the GTA this year. But the actual number is likely to be closer to 18,000 as project completions get pushed into 2014 or beyond owing to a shortage of construction crews, an ongoing bottleneck that has had an unintended effect of keeping a lid on supply.
“Projects that are well priced and located are still doing very well,” Hildebrand says, noting some “highly anticipated projects” being launched in the next few months could see sales improve by year-end.
It should be clearer by the end of May how sales of projects launched so far this year are doing, but early indications are that first-time buyers are back looking, especially within the 416 boundaries, says Jim Ritchie, vice-president of Tridel.
Tridel hopes to start construction late this year on its Ten York project, where it has already sold 620 of the building’s 694 units.
Developers are now looking to hopeful signs on the resale condo front, says Hildebrand. Sales in that sector were up 9 per cent in the first three months of 2013 over the final quarter of 2012. Those gains followed months of double-digit declines and may be the first real indicator that consumer confidence is picking up.
Resale prices, however, didn’t fare as well. They slipped 0.5 per cent in the first quarter of 2013 over the last quarter of 2012 to $533 per square foot. A surge in listings of more than 25 per cent accounts for much of that, according to Urbanation.
Source: thestar.com
Author: Susan Pigg
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