The Unsold Condo Controversy in Toronto

It’s been a wild, up and down year for condominium sales in the City of Toronto thus far this year. Real estate analysts for major newspapers and banks have commented on the wide spectrum of condo market conditions the city has seen just in the past ten months. Everything from tremendous over supply of condos, to red hot sales, and back again.

Jamie Sturgeon of Global News,  reported back in February about the glut of unsold condo units left available on the market. Quoting economist Sal Gautieri of BMO, over 10,000 condominiums were completed by builders in January, a record high for any month in Toronto, by a long shot.  Roughly eight times more than the average for the past decade. Gautieri accounted for this by arguing that a substantial number of construction delays that had accumulated in 2014 were finally being completed, completing the transaction for sales of homes that were issued in 2011, a record year for condo sales. The culmination of completed units earlier this year left 1,602 units on the market, the highest it’s been since 1994.

Toronto condosThings turned around in the summer, with some claiming that the best case scenario for the Toronto condo market had occurred. Susan Pigg of The Toronto Star, reported back on August 5th of this year that demand for condos had been strong throughout the summer, and that the overstock of unsold units had declined significantly across the GTA in the second quarter, according to developers and condo research firm Urbanation. The number of unsold units in the city dropped by 13% in the spring of 2015 versus a year prior/ Even with this decline, however, the total number of unsold units was still hovering around 17,700 by the end of June, according to the same Urbanation report.

Considering the massive fluctuation that took place this year, it’s not surprising that some analysts are skeptical of the statistics being published. According to Tamsin McMahon of The Globe and Mail, one such critic is Benjamin Tal of the Canadian Imperial Bank of Commerce (CIBC). Tal insists that those commentators who see the number of unsold condos in the city as an accurate gauge of the overall health of the market, “are barking up the wrong tree.”

According to Mr. Tal’s estimates, there are 2,000 completed, but unsold condos in the Greater Toronto Area, half in the City of Toronto, well above the long-term average for the region. Some of these unsold units can be accounted for by the housing development boom of 2012, when over 50,000 housing starts were completed, 30,000 of which are condos. Many are the echoes of record levels of housing starts in 2012, when developers began construction on 50,000 homes, of which 30,000 were condos.

The big discrepancy that Tal reveals within the recent statistics is that a quarter of unsold condos in Toronto can be found in five buildings, out of 139 active development projects. Almost a third could be attributed to just four out of 77 construction firms.