Despite mounting concern about a slide in prices, Toronto’s condominium developers barreled full steam ahead in May hiring more workers to start construction amid a pickup in new projects being launched.
Construction began on about 2,400 condominium units in May, according to fresh figures released by the Canada Mortgage Housing Corp. Monday – a strong pick up compared to previous months when project launches ground to a halt amid fears that oversupply could lead to a sharp downturn in prices.
The May surge may exacerbate those concerns as the number of unsold units being built adds to high inventories.
“These are projects that opened up when the market was very strong,” Shaun Hildebrand, executive vice-president at Urbanation, a market researcher, said.
Indeed, the majority of new units are pre-sold, having been bought last year when buyers and investors were trying to get into the market before stiffer lending rules went into effect.
Last month’s uptick, which caught some market watchers off guard, is a look in the rear view mirror at what demand was like in early 2012 when many of the condos were being sold, Hildebrand said.
Sales figures are the forward-looking indicator to pay attention to, David Madani, economist at Capital Economics says.
There, the Toronto Real Estate Board shows faltering sales amid evaporating demand. In the outlying 905 region, existing condo sales are off 16 per cent year on year. In the city’s core areas, they’re off 6.4 per cent.
“That’s not a real sign of stability, that’s a market that’s falling,” Madani said. “I worry a bit about Toronto because sales have slumped and they’re still building a lot of units.”
Indeed, new project launches have picked up since a post-recession low of nine during the first three months of this year, Hildebrand said. No less than 17 new developments have launched across the region so far in the second quarter, according to Urbanation.
The rash in new building provided a pop in last month’s blockbuster jobs report as well, with the construction sector seeing much higher-than-expected hiring.
Economists and market watchers say however the May burst is likely a one-off, as developers ease back further on new developments, which will hit at jobs and act like an anchor on the economy.
“Momentum is expected to taper off in the months ahead given the broad-based slowdown seen in both the resale and new housing market,” TD’s Sonya Gulati said a note last week.
Still, agents with their boots on the ground say they aren’t seeing much of a slowdown yet – nor do they expect a downturn to be very painful, so long as interest rates from lenders don’t rise too high and Toronto’s economy remains healthy.
“We haven’t a seen a crash that many so-called experts have been predicting. And it really doesn’t look like it’s going to happen any time soon,” Andrew la Fleur, a sales agent in downtown Toronto said.
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