Even close watchers of Toronto’s condo explosion over the city’s skyline in recent years were struck by the sheer volume of new units completed in January.
Builders finished a staggering 10,368 condominiums to start 2015. And while the majority of the new units were sold well in advance, there were still more than 1,600 that weren’t – a 21-year high, according to experts.
While market watchers chalk up the January surge to the completion of one or two big projects, the tidal wave of completions obliterated the previous single-month record (a few times over — see chart here). It also helped underscore the frenetic pace of building that’s occurred in recent years in Toronto, a city whose housing market is building up seemingly as quickly as it is out.
So far, supply has continued to be outstripped by demand, leading to a comfortable, steady rise in prices throughout the city’s ongoing property boom. But, that trajectory for condo prices may now quickly be changing.
MORE: Unsold condos pile up in Toronto, hit 21-year high
Demographic shift
Robert Kavcic, an economist at Bank of Montreal, said a mounting supply of condos in Toronto coupled with longer-run demographic shifts could serve to suck the wind out of prices for years to come.
Growth in the 25-to-34 year-old age bracket – a.k.a. first-time buyers who generally fit the bill of your average condominium purchaser – is decelerating, Kavcic said in a new research note on Wednesday.
While completions won’t likely touch the lofty 10K mark reached in January again this year, experts say the crush of condo projects that were started in 2011 or so are now nearing the finish line. Condo completions will be elevated throughout the year.
‘Combining these supply and demand fundamentals suggests that Toronto condo prices could be in for a prolonged period of staganation’
Prolonged period
February’s numbers seem to confirm it, with 4,300 units finished in the month – which would have been the new record if not for January.
“Combining these supply and demand fundamentals suggests that Toronto condo prices could be in for a prolonged period of staganation, or very sluggish growth,” Kavcic said.
The upshot, at least where it concerns other homeowners or would-be ones, is that the trend will further widen the already large gulf that’s opened up between single-family homes and starter condos, Kavcic said.
In contrast to the relatively pedestrian 10 per cent jump in Toronto condo prices since 2012, according to BMO, single family homes have surged 25 per cent. That’s pushed the average selling price of a detached property into seven-figure territory ($1,040,000) in February – a high price tag that’s only getting higher, Kavcic predicts.
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