Tuesday, September 19, 2006

Toronto is the most active condo market in North America 2ndQ 2006

Toronto most active condo market in North America

Toronto was the most active, and probably the largest condominium market in North America in the second quarter of 2006, according to a report published by Urbanation, an independent analysis company that has been doing in-depth studies of the Toronto condo market since 1981. The Urbanation report says the new condominium market now represents 39 per cent of total new home sales in the Toronto CMA.

The Urbanation report says there were 255 new condominium projects representing more than 53,000 units in the Toronto CMA in the second quarter of this year. However more than 77 per cent of the units were already sold and more than 28,000 were under construction in the quarter.

In the first six months of 2006, more than 8,300 buyers visited sales centres throughout the city and found what they were looking for -- the right product, for the right price, in the right location. This is similar to the sales performance in the first half of 2005, which ended up being a record year for new condominium apartment sales with more than 16,000 sold across the Toronto CMA.

Urbanation says developers must pre-sell 65 – 70 per cent of the units from floor plans before a project can proceed. The company’s report indicates that in the second quarter of this year, unsold units represented 23 per cent of total new condominium units on the market. In contrast, when the condominium market crashed in the late 1980s, unsold units represented nearly 50 per cent of the total inventory in active projects.

Urbanation also says today's condominium buyers are savvy, well-educated consumers who are taking the time to shop around and compare projects to find the best value for their money. This means that prices have remained both competitive and affordable as the condominium market is largely driven by "real" buyers looking for real homes to move into. By contrast, in the 1980s the demand for new condominiums was driven largely by speculators and investors. This resulted in a sharp increase in both sales activity and prices over a very short period of time and created an unsustainable market bubble.

There are investors buying new condominiums in 2006, Urbanation says, but they represent less than one-quarter of total new condominium buyers in the Toronto CMA. “Due to increasing construction costs, we have seen higher prices for new condominium projects over the past six to nine months, and increasing mortgage rates, so statistically speaking, the number of people who can afford to purchase a new home has decreased. The good news so far is that our data does not show any early warning signs of a significant market downturn as sales have remained strong, suggesting that overall affordability remains high and consumers are still finding excellent value for their money.”

However, Urbanation says continued rising construction costs and mortgage rates over the long term may increase the chances of a "soft landing" for the condominium market in future, but not a crash similar to what occurred in the 1980s.

For more information please contact A. Mark Argentino

A. Mark Argentino Associate Broker, P.Eng.,
Specializing in Residential & Investment Real Estate
RE/MAX Realty Specialists Inc.
2691 Credit Valley Road, Suite 101, Mississauga, Ontario L5M 7A1

BUS 905-828-3434
FAX 905-828-2829
E-MAIL mark@mississauga4sale.com
Website: Mississauga4Sale.com

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