New condo sales in Toronto fell 47 per cent in the last quarter of 2012, even as the number of units under construction hit an all-time high, according to data from market research firm Urbanation.
There were 3,841 new condos sold in Toronto in the last three months of 2012, compared with 7,226 sales in the same period a year earlier.
At the same time, the number of total condo units under construction in Toronto hit a record high of 56,866 in 2012. The number of construction starts also hit an all-time high, at 24,388.
Yet Urbanation doesn’t appear concerned about overbuilding in the country’s largest real estate market — something that has worried some policy makers, including Bank of Canada governor Mark Carney, in recent years.
“Despite concerns over the level of unsold supply in the new condominium market, the ratio of sold to unsold units has consistently been above the long-run average in recent years,” Urbanation executive vice president Ben Myers said in a statement, noting the ratio of sold units in Toronto was 79 per cent, just higher than the long-run average of 78 per cent.
However, the record-high number of condos under construction is not reflected in current sales data, because those condos are not yet on the market except in the form of pre-sales.
With an unprecedentedly high number of condos set to enter the Toronto market, prices could soon be under severe pressure, unless slowing demand for condos makes a dramatic reversal and begins to grow again.
But Urbanation’s Myers warns prospective buyers not to wait for a price collapse.
“Many investors chose to hold and rent their units in 2012 rather than sell them into uncertain market conditions,” he said in a statement. “This is contrary to the theory that condominium unit holders will panic and sell their suites at significant discounts during a softening market.”
And while recent data suggests a softening in condo prices in Toronto in recent months, Urbanation’s data suggests the lower prices may be the result of smaller units.
While Toronto Real Estate Board data show condo prices declining 0.9 per cent, year over year, in the last month of 2012, Urbanation’s data shows a different story when you break prices down per square foot.
Urbanation reports the average selling price in Toronto in 2013 was $536, up 5.2 per cent from the year before. That would suggest condo prices may be falling because developers are building smaller units.
The average size of a condo in Toronto fell from more than 1,000 square feet a decade ago to around 921 square feet in 2011.