Despite brisk activity, anxiety surrounding market remains
TORONTO – May 07, 2012: Urbanation Inc., the leading source of information and analysis on the Toronto condominium market since 1981, today released its Q1-2012 market overview.
The new condominium apartment market in the Toronto CMA saw 6,070 sales in Q1-2012, the highest of any first quarter on record. The 338 active projects and 84,698 active units were also record highs. The average of 18.0 sales per project, however, was lower than in Q1-2011 (18.3) and Q1-2010 (20.4)
“Despite the record sales in Q1-2012, Toronto CMA brokers and developers still report anxiety about the future health of the condo market,” says Ben Myers, Urbanation Executive Vice President and Editor. “The probability of a market crash or major price correction is very small, but the prevalence of media coverage for this outcome remains high.”
Despite this, investors and end-users continue to buy. The average sold price index increased to $519 psf in the Toronto CMA, an increase of 2.0 per cent quarterly and 8.1 per cent annually. The average unsold unit is being offered at $566 psf in the CMA. Urbanation estimates that the average price in the new market is $393,000 with an average size of 757 sf.
The resale market was weaker, with resale index pricing decreasing quarterly for the first time since the recession-impacted Q1-2009, falling from $400 psf in Q4-2011, to $396 psf in Q1-2012. That drop represents a 1.0 per cent quarterly decline, although annual growth remained positive at 3.7 per cent. The average resale price also dropped 1.0 per cent quarterly, from $361,000 to $358,000, although it rose 3.8 per cent year over year.
While resale pricing data seems to indicate the market is slowing, there were, in fact, just 64 fewer re-sales in the first quarter, compared to a year earlier (3,888 vs. 3,952), while the average days on the market remained unchanged at 30. In addition, fewer units have sold in newly registered buildings; these new units typically pull the resale average up. Less resale listings in newly registered buildings suggests a larger share of long-term investors, as opposed to speculative ‘flippers’.
In its Q4-2011 release, Urbanation identified unsold supply as one of several potential factors that could potentially derail the Toronto condominium market. There were 15,554 unsold units at the end of Q1-2012, an increase of 4 per cent quarterly and 27 per cent annually.
But as financial institutions, especially those that are Canadian based, move to tighten lending, resulting project cancellations may mitigate the level of unsold inventory.
The market will be further tested in Q2-2012, however, with the potential for as many as 40 new project launches with more than 11,000 new units that could come to market. If the absorption rates for new and existing projects remain constant at 55 per cent and 20 per cent in the second quarter, unsold inventory in the market will still rise to over 17,000 units, nearing the market high of 17,600 from Q4-2008.
“With the market being much larger now, the question is: Is this higher level of unsold inventory the new reality?” asks Myers. “Or is it a sign that the market has reached its peak? We’ll have to see.”
Urbanation is Canada’s leading condominium market research company. Since 1981, Urbanation has analyzed the Toronto condominium market, publishing the “industry bible” – Urbanation’s Condominium Market Survey. This quarterly report tracks new, resale and future condominium projects. The newest report from Urbanation is UrbanRental, which tracks activity in the condominium rental market. Urbanation also provides the development community with essential consulting services, which include site and topic specific market studies and surveys.
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