First-quarter results were surprisingly strong, but the second quarter may be a better indicator
Even as there are signs greater Toronto’s real estate market is losing a little of its lustre, the condo market appears to be holding steady.
“The big news is that new condo statistics are identical to the same quarter as last year,” said Jane Renwick of Urbanation condo market researchers, which released a report on the GTA market’s first quarter yesterday.
“Everybody was worrying if last year’s success was the boom before the bust,” she said. “While sales per project decreased, the same number of buyers showed overall, and that suggests things are holding steady.”
New condo sales came in at 3,433 in the first quarter of 2008 — only eight units fewer than the same time last year. But those almost identical numbers were spread over 25% more buildings, as the number of projects in the city continues to grow.
Condos tower over low-rise real estate, both in pricing per square foot and number of units sold.
“Many of them are in prime locations, near subways. And you can buy one for under $300,000 — there are some still advertising for under $250,000. You can’t buy anything close to that in the low-rise market.”
Ms. Renwick said the findings make her “cautiously optimistic” about the market. “The stock market’s been very volatile, but the real estate market is holding,” she said.
Some of Toronto’s established condo developers didn’t see these kind of numbers coming.
“I’m very surprised by them,” said Les Mallins, founder of Streetcar Developments, which has many developments in Toronto’s east end.
“We had a fantastic first quarter, but from talking to other developers and agents, we didn’t think it would come in strong overall.”
Mr. Mallins said he was especially surprised the results didn’t seem to be affected by the city’s new Land Transfer Tax, which began on Dec. 1.
“My sense is that the second quarter will not show this continued strength,” he said, but added the Urbanation report will make him reconsider the scale of project at Queen and Gladstone in the west end.
Mr. Mallins said Streetcar is planning a 40-to 45-unit building there, but it is considering a joint venture with Context Development, which built the condos in the old Tip Top building, and owns the land behind Streetcar on Queen West.
“We’re putting our feelers out,” he said. “This suggests we should go for the bigger project, if you look at the numbers in isolation.”
Developers aren’t the only ones cautiously reassured by the trend. Those numbers are the sort that realtor Bryan Ble uses to build confidence in condo buyers that seem more cautious this year.
“People are taking longer in the process. Something that may have sold in 45 days before is now taking 57,” said Mr. Ble, a sales representative with Sutton in Toronto.
Last year’s blistering pace had its own drawbacks. “There simply isn’t the manpower in Toronto to keep up,” Ms. Renwick said. “There were a significant number of delays last year: Starts were slower than expected, completions were slower than expected, even though the construction industry was working at capacity.”
She described the market as both “broad and still very buoyant,” but said Urbanation expects it “to return to more normal levels” this year, as last year’s numbers outperformed the previous two years by 40%.
She noted, though, that fundamental changes in the economy since last year make the next quarter hard to predict.
“We’ve already had 17 new openings in the second quarter, so it’s on track for the level of new units,” she said. “But whether the same absorption will happen as last year? To me, it will be a tough act to follow.”
BY THE NUMBERS
Urbanation’s first-quarter numbers for Toronto condos:
3,433 New condo sales (8 units fewer than Q1/07).
277 New condo projects (56 more than Q1/07).
388 Index price, in dollars, per square foot for new condos ($40 more than Q1/07).
187 Decline in unit resales.
4,546 New condo units under construction (233% higher than Q1/07).
50 Percentage of GTA condos under development that are in the former City of Toronto.