Condo trouble in Toronto

Housing starts are way down

Last week, Canada Mortgage and Housing Corporation reported that the annual rate of housing starts was 171,500 units in December, down from 198,200 the month before—roughly a 13 per cent drop. “It was really the apartment sector that dragged the numbers lower,” says Ted Tsiakopoulos, CMHC’s Ontario regional economist. And in November, building permits dropped 11.2 per cent, according to Statistics Canada. A drop in multi-family dwellings in B.C. was cited as one of the main reasons.

If condo developments are declining in Ontario and in B.C., though, Toronto is a puzzling outlier: it seems like there’s a new condo going up on every block. “The trillion-dollar question is, who’s buying them all?” says Derek Holt, vice-president at Scotia Capital Economics. “The stock of unsold condos overhanging the marketplace is at its highest since the 1990s.” According to George Carras, president of the real estate information firm RealNet Canada Inc., 19,710 new condo units had been sold in the Greater Toronto Area as of Nov. 30, with 15,727 remaining in 2010’s active inventory.

Stephen Dupuis, president and CEO of the Building Industry and Land Development Association of Toronto, calls the city “the envy of North America.” Toronto’s population is growing, he notes, and “our real estate market is strong by historical standards.” Foreign buyers have taken note, buying up condos to rent them out, he says. But housing starts in the condo market are notoriously volatile, Carras says: developers filing for building permits on a 300-unit project, for example, file permits for all 300 units, which creates major statistical variations from one month to the next. Both he and Dupuis say sales are a better indicator and, according to Carras, October was the second-highest month of new condo sales in the GTA since 1998.

Dupuis, for one, is optimistic about the coming year. And with roughly 21,000 new units set to hit the market in 2011—and rumblings that the Bank of Canada could start increasing interest rates by this summer—developers must be banking on the fact they’ll be able to move those condos, and soon.

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