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Baby, we got a bubble!?

interested

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From the globe and Mail today:
http://www.theglobeandmail.com/glob...t-for-foreign-property-buyers/article4736093/


BREAKINGVIEWS
Hong Kong pulls welcome mat for foreign property buyers

PETER THAL LARSEN

Reuters Breakingviews

Published Monday, Oct. 29 2012, 7:30 PM EDT

Last updated Monday, Oct. 29 2012, 7:39 PM EDT


Hong Kong’s new anti-foreigner property tax may catch on elsewhere. Battling the effects of cheap money and capital flight, the territory’s authorities have slapped a 15-per-cent stamp duty on buyers without a permanent resident’s card. Though the move will have unintended side effects, its political logic could prove appealing in other urban hot spots.
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Video: Hong Kong slaps 15% tax on foreign home buyers
5002BO-UK-FOREIGN_HOME_BUYERS_O_ NONE
Real Estate

Video: Foreign home buyers flock to London

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The average cost of a small Hong Kong apartment rose by a fifth in the first nine months of the year. Yet the territory’s currency peg to the U.S. dollar means raising interest rates would merely attract more foreign inflows. So far, the authorities have concentrated their efforts on protecting the banking system by placing increasingly tight limits on mortgages.

The new special stamp duty is aimed squarely at the other driver of Hong Kong property inflation: Chinese buyers. Investors from the mainland seeking a safer place to park spare cash have become an increasing feature in recent years. In 2008, non-residents bought one in 17 of Hong Kong’s newly-built properties. Last year, they snapped up one in five.

Taxing non-residents is a blunt instrument. It punishes Hong Kong-based expatriates who want to establish a permanent base in the city as well as domestic developers seeking to spruce up old buildings. It also treats mainland buyers as foreigners. These groups may yet challenge the new measures in court.

However, the political appeal is clear. Rising property prices used to be a sign that a city was attracting high earners whose taxes and spending would add to prosperity. But when real estate becomes a safe-harbour asset for foreign landlords, many of them effective absentees, that argument no longer applies.

Singapore has also imposed an extra stamp duty on foreign buyers. Others may follow suit. House prices in central London, for example, have soared in defiance of Britain’s economic gloom as investors seek a haven from the storms of the euro zone. While European law would make it hard to discriminate against buyers from Spain or Italy, local authorities could take other measures, such as imposing extra taxes on owners who leave their houses empty. The anti-foreigner property backlash has some way to run.

More Related to this Story

Economy Lab Expect China to hold the line on housing restrictions

Pace of U.S. home resales hits two-year high

China’s economy cools, shows need for policy action


My first reaction reading this was won't happen here as prices are falling. My second was....if Hong Kong and Singapore and I believe Australia is doing the same, the cheap money remains. People and money want to invest...will this have the effect of meaning that money that was going to go to Hong Kong may again look at Vancouver and Toronto....thereby further aggravating the problem yet again?
 

daveto

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The attached report: “Should We Worry About a US-Style Housing Meltdown?†takes a closer look at the similarities and differences between the current situation in the Canadian housing market and the situation in the pre-recession US market.


http://research.cibcwm.com/economic_public/download/cw-20121030.pdf

In general, a good report and he provides many good reasons which would mitigate Canadian house prices following the experience of the US in 2006. But my brief reading suggests he has glossed over the effect of at least 4 areas.

1. US 30yr vs Canada 5yr terms
Mentioned, but then claims it is not a concern because Canadians have moved from variable to fixed rates mortgages. A non-sequitor which ignores what would happen as the 5 year terms end in a higher mortgage rate environment. The US had 20% of its market with 2% teasers with 2 yr terms and guaranteed increases thereafter. Canada has the majority of its market with 3%-4% teasers with 5 yr terms and probable increases thereafter. Better perhaps, but hardly comforting.

2. Canadian Prices 10% higher than US at Peak
Displayed in Chart 1, but then ignored.

3. CMHC Changes
As we know, we've seen a lot of fiddling with this over since 2006. The effects of which were not addressed in the report.

4. Central Bank Rates
The US was able to mitigate their housing prices drop via monetary policy which has substantially lowered mortgage rates over the past several years (from 6% to as low as 3.5% now).
http://ycharts.com/indicators/30_year_mortgage_rate

While this didn't help those with 2% teaser rates, it has helped the majority of homeowners and new home buyers, and helped to mitigate price decreases. In contrast, Canada is already at rock bottom in its mortgage rates. The effect of which was not addressed in the report.


IMO, Ben Tal is much too smart for these omissions to be unintentional. He's employed as bank economist, and is writing on behalf of his employer and his report should be viewed in that context and read with an analytical eye.
 

Riverdale Rink Rat

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1. US 30yr vs Canada 5yr terms
Mentioned, but then claims it is not a concern because Canadians have moved from variable to fixed rates mortgages. A non-sequitor which ignores what would happen as the 5 year terms end in a higher mortgage rate environment. The US had 20% of its market with 2% teasers with 2 yr terms and guaranteed increases thereafter. Canada has the majority of its market with 3%-4% teasers with 5 yr terms and probable increases thereafter. Better perhaps, but hardly comforting.

>> You show your ignorance about how mortgages work by calling a 5 year term mortgage a 'teaser.' The whole reason the Canadian market is more stable is the shorter term - and, yes, that's because the bank is protected by the shorter term. That sucks for the individual home owner in difficulty, but it's better for the market.

2. Canadian Prices 10% higher than US at Peak
Displayed in Chart 1, but then ignored.

3. CMHC Changes
As we know, we've seen a lot of fiddling with this over since 2006. The effects of which were not addressed in the report.

>>Uh, the CMHC changes are to clear the market of froth. They would augment his argument.

4. Central Bank Rates
The US was able to mitigate their housing prices drop via monetary policy which has substantially lowered mortgage rates over the past several years (from 6% to as low as 3.5% now).
http://ycharts.com/indicators/30_year_mortgage_rate

While this didn't help those with 2% teaser rates, it has helped the majority of homeowners and new home buyers, and helped to mitigate price decreases. In contrast, Canada is already at rock bottom in its mortgage rates. The effect of which was not addressed in the report.

>> I must admit I do not understand your point here. Low rates are bad because we don't have the ability to further thebubble by lowering them? I thought you were arguing that the bubble should be popped. Please clarify.


IMO, Ben Tal is much too smart for these omissions to be unintentional. He's employed as bank economist, and is writing on behalf of his employer and his report should be viewed in that context and read with an analytical eye.

I think you're looking to create a conspiracy where none exists. Tal is contrasting the US experience to here and hoping the different market dynamics will allow for an easier adjustment. He didn't rubbish the evidence, he acknowledged it.
 

klb86

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Urbanation's Q3-2012 Press Release - Toronto Condominium Market Results

Lack of New Project launches leads to decline in new condominium sales in q3-2012
Cautious developers hold back and reevaluate pricing


TORONTO – November 1, 2012: Urbanation Inc., the leading source of information and analysis on the Toronto condominium market since 1981, today released its Q3-2012 market overview.


In the Toronto Census Metropolitan Area (CMA) there were 3,317 new condominium apartment sales in Q3-2012, a decrease of 30% from the second quarter.


“With slowing sales and a record level of unsold inventory in the market in the second quarter, condominium developers reacted quickly by delaying their project launches, especially in the ‘416’ area,†says Ben Myers, Urbanation Executive Vice President. “Just five projects launched in Toronto in Q3-2012, as developers chose to review their pricing assumptions and unit mixâ€.


The average unsold unit in the Toronto CMA was being offered at $573 per-square-foot (psf) at the end of Q3-2012, an increase of just 2% year-over-year. Unsold pricing in the former City of Toronto remains virtually unchanged from one year ago, rising from $668 psf to $670 psf.


The lack of new site openings in the third quarter resulted in a decrease in unsold inventory from the CMA record high of 18,123 units in Q2-2012 to 17,182 units in Q3-2012. With 20% of the 86,108 units (341 projects) unsold, the share of unsold inventory in the Toronto CMA remains below the 10-year average of 22%.


With condominium apartment construction starts outpacing completions for the 8th consecutive quarter, units under construction in the CMA have set another record high at 207 projects and 56,336 units.


“The number of unit completions in 2012 are well below our forecasts, as construction delays have pushed back occupancy on a number of projects†adds Myers. “The average project that completed construction in 2012 took 3.85 years from sales launch to occupancy, compare that to 2003, when the average took just 2.68 years for a similarly sized project (205 units vs 197 units)â€.


The reduced level of project completions has contributed to a very tight condominium rental market, as Urbanation’s UrbanRental report indicates a record-high lease-to-listings ratio in Q3-2012, an indication that demand is much higher than supply for investor held rental units.


The resale condominium market conditions also softened in Q3-2012, as transactions fell 32% quarterly in the Toronto CMA from 5,050 in Q2-2012 to 3,413. Pricing on a per-square-foot basis remained flat in comparison to the second quarter at $407 psf, as both the average unit size traded and the average end-selling price decreased (910 sf to 891 sf / $370,000 to $362,000).


“The change in the mortgage insurance rules may have forced many buyers to settle for smaller units then they had previously desired†says Myers. “The number of resale transactions for units priced over $400,000 fell 40% compared to last quarter, while there was a 38% quarterly drop in units traded over 1,000 sf.â€


Just 10 projects, or 2,035 condominium units registered in Q3-2012, and the dearth of new supply resulted in a decline in resale listings quarterly from 10,163 in Q2-2012 to 9,032 in Q3-2012. Urbanation expects a much higher level of resale listings in 2013, as more than half of the 56,336 condominium units under construction are expected to complete construction next year.


The 28,000-plus completions next year could add as many as 14,000 new condominium rental units to the Toronto CMA via private landlords, which would represent a whopping 25% increase in condominium rentals in the Metropolitan Area.

http://urbanationinc.blogspot.ca/2012/11/urbanations-q3-2012-press-release.html?spref=tw
 

interested

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Along the same venue:
From National Post today:
http://business.financialpost.com/2012/11/01/toronto-condo-projects-delayed-as-sales-plunge/ Just five projects launched in Toronto in Q3-2012, as developers choose to review their pricing assumptions and unit mix




Condominium developers have quickly reacted to a downturn in the housing market by cancelling or delaying projects, according to a new survey which says sales dropped 30% in one quarter.

Urbanation Inc. said there 3,317 condominium apartment sales in the third quarter, a sharp decline from just three months earlier and reflecting the increasing amount of unsold inventory in the country’s largest housing market.

“With slowing sales and a record level of unsold inventory in the market in the second quarter, condominium developers reacted quickly by delaying their project launches, especially in the ‘416’ area,” says Ben Myers, executive vice-president of Urbanation, in a release. “Just five projects launched in Toronto in Q3-2012, as developers choose to review their pricing assumptions and unit mix.”

Prices are also being impacted. The average unsold unit in the Toronto census area was being offered at $573 per-square-foot at the end third quarter, up just 2% year over year. Unsold inventory in what was the former city of Toronto was being offered at $670 per square foot, up from $668 a square foot from a year ago.
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The good news is the lack of new supply is helping to reduce inventory levels as unsold inventory hit a record 18,123 in the second quarter of 2012. It dropped to 17,182 in the third quarter.

“With 20% of the 86,108 units (341 projects) unsold, the share of unsold inventory in the Toronto [metro area] remains below the 10-year average of 22%,” said Urbanation, in its release.

In the interim, condominiums in the pipeline continue to get built. There were 207 projects with 56,336 under construction in the metro area. The eight consecutive quarter apartment construction starts have outpaced completions.
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“The number of unit completions in 2012 are well below our forecasts, as construction delays have pushed back occupancy on a number of projects” said Mr. Myers. “The average project that completed construction in 2012 took 3.85 years from sales launch to occupancy, compare that to 2003, when the average took just 2.68 years for a similarly sized project (205 units versus 197 units).”

The market for resale market also continues to soften. There were 5,050 sales of existing units in the third quarter, a 32% decline from 3,413 units sold in the second quarter. Prices are also flat with the average unit selling for $407 per square foot, the same as the second quarter.

Investors might have resorted to smaller units to combat the high prices, says Mr. Myers. The average size of a unit sold shrunk from 910 square feet to 891 square feet, reducing the average end sale price from $370,000 to $362,000.

“The change in the mortgage insurance rules may have forced many buyers to settle for smaller units then they had previously desired,” he said. “The number of resale transactions for units priced over $400,000 fell 40% compared to last quarter, while there was a 38% quarterly drop in units traded over 1,000 square feet.”



And also this: Regarding the Mirvish new project:
Toronto’s tallest condo towers designed for bull market that no longer exists

Architect Frank Gehry is designing three condo towers in Toronto that would be North America’s tallest residences. His latest contribution to his home town comes as the Canadian government is trying to cool the market after home prices surged 85% in the past decade.

The three sculpture-like towers, funded by theater promoter David Mirvish, will rise as high as 85 floors beside a century-old theater and near the Gehry-designed Art Gallery of Ontario. The skyscrapers, with a combined 2,600 residential units, will compete with hundreds of other projects in a city with more residential buildings under construction than anywhere else in North America.

Read the rest of the article here.
 

interested

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Urbanation's Q3-2012 Press Release - Toronto Condominium Market Results

Lack of New Project launches leads to decline in new condominium sales in q3-2012
Cautious developers hold back and reevaluate pricing


TORONTO – November 1, 2012: Urbanation Inc., the leading source of information and analysis on the Toronto condominium market since 1981, today released its Q3-2012 market overview.


In the Toronto Census Metropolitan Area (CMA) there were 3,317 new condominium apartment sales in Q3-2012, a decrease of 30% from the second quarter.


“With slowing sales and a record level of unsold inventory in the market in the second quarter, condominium developers reacted quickly by delaying their project launches, especially in the ‘416’ area,” says Ben Myers, Urbanation Executive Vice President. “Just five projects launched in Toronto in Q3-2012, as developers chose to review their pricing assumptions and unit mix”.


The average unsold unit in the Toronto CMA was being offered at $573 per-square-foot (psf) at the end of Q3-2012, an increase of just 2% year-over-year. Unsold pricing in the former City of Toronto remains virtually unchanged from one year ago, rising from $668 psf to $670 psf.


The lack of new site openings in the third quarter resulted in a decrease in unsold inventory from the CMA record high of 18,123 units in Q2-2012 to 17,182 units in Q3-2012. With 20% of the 86,108 units (341 projects) unsold, the share of unsold inventory in the Toronto CMA remains below the 10-year average of 22%.


With condominium apartment construction starts outpacing completions for the 8th consecutive quarter, units under construction in the CMA have set another record high at 207 projects and 56,336 units.


“The number of unit completions in 2012 are well below our forecasts, as construction delays have pushed back occupancy on a number of projects” adds Myers. “The average project that completed construction in 2012 took 3.85 years from sales launch to occupancy, compare that to 2003, when the average took just 2.68 years for a similarly sized project (205 units vs 197 units)”.


The reduced level of project completions has contributed to a very tight condominium rental market, as Urbanation’s UrbanRental report indicates a record-high lease-to-listings ratio in Q3-2012, an indication that demand is much higher than supply for investor held rental units.


The resale condominium market conditions also softened in Q3-2012, as transactions fell 32% quarterly in the Toronto CMA from 5,050 in Q2-2012 to 3,413. Pricing on a per-square-foot basis remained flat in comparison to the second quarter at $407 psf, as both the average unit size traded and the average end-selling price decreased (910 sf to 891 sf / $370,000 to $362,000).


“The change in the mortgage insurance rules may have forced many buyers to settle for smaller units then they had previously desired” says Myers. “The number of resale transactions for units priced over $400,000 fell 40% compared to last quarter, while there was a 38% quarterly drop in units traded over 1,000 sf.”


Just 10 projects, or 2,035 condominium units registered in Q3-2012, and the dearth of new supply resulted in a decline in resale listings quarterly from 10,163 in Q2-2012 to 9,032 in Q3-2012. Urbanation expects a much higher level of resale listings in 2013, as more than half of the 56,336 condominium units under construction are expected to complete construction next year.


The 28,000-plus completions next year could add as many as 14,000 new condominium rental units to the Toronto CMA via private landlords, which would represent a whopping 25% increase in condominium rentals in the Metropolitan Area.

http://urbanationinc.blogspot.ca/2012/11/urbanations-q3-2012-press-release.html?spref=tw

I would think this would also herald in a rather large hit to the rental market. May be a bit delayed due to construction delays but mid 2013 rents I think will be down from present if this is correct.
 

CN Tower

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I would think this would also herald in a rather large hit to the rental market. May be a bit delayed due to construction delays but mid 2013 rents I think will be down from present if this is correct.

The most important stat from this report:

Through nine months in the Toronto CMA new condominium apartment market, there were 14,156 sales, with the market on pace for a 35% decline from the record selling 2011 result (28,190 new sales). The 3,317 third quarter sales were down 30% from Q1-2012, and 47% from Q3-2011.

Almost 50% off from last year!
 

radioheadmike

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I am so confused. If it is so obvious that the condo market is going downhill, why is it that all of a sudden high profile projects are being announced?

List of recent high profile projects -

1. Oxford place
2. 10 York street
3. Mirvish-Gehry

Is it just business-as-usual for them until the condo market does collapse? Won't they be losing a lot of initial investments?

Also, there is so much doom and gloom articles out there but I can't seem to get a consistent answer as to where is the market currently. I look at GUAVA graphs and everything looks substantial. So is the National Post, Globe and Mail pooping out these articles to sell subscriptions?
 
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interested

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^^^^
Like any business, developers have to conduct business. With a number of projects on hold, the buyers are distributed over less projects.
Also, remember the time lag. If it takes almost 4 years to complete (and 1 year for sales )and say very few projects go forward in the next 2-3 years (other than the high profile ones), one could speculate that on completion there will be large demand for the projects. A lot of
if's in that last sentence but you get my jist.

The problem is prices are still to high on PRECON exceeding resale and it is a big assumption to expect prices to increase, the market to be better by completion time.

Finally, one must remember that until say a few years ago with the big run up and sales of full condos in a weekend or a month, typically developers allowed 1 year to sell 60%. So now they are allowing up to 1 and 1/2 years to get to 70%+sales (now required for most projects) and then construction of another 2-4 years. We are just perhaps returning to more "normal" markets in that sense.
 

rbt

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The most important stat from this report:

Almost 50% off from last year!

Yup, and still the hottest condo market in North America by a fairly wide margin.

The developer that can profitably build pre-con downtown in the $600/sqft range is going to cleanup.


Keep in mind that an 80% drop from Toronto's peak would be on par with Chicago's best year for condo sales in the last decade; nearly 1 condo breaking ground per month.

Toronto sales were absurdedly high; nearly 3 times Miami's record years. 5000 units/year is a much more reasonable pace for a city Toronto's size.
 
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interested

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Yup, and still the hottest condo market in North America by a fairly wide margin.

The developer that can profitably build pre-con downtown in the $600/sqft range is going to cleanup.


Keep in mind that an 80% drop from Toronto's peak would be on par with Chicago's best year for condo sales in the last decade; nearly 1 condo breaking ground per month.

Toronto sales were absurdedly high; nearly 3 times Miami's record years. 5000 units/year is a much more reasonable pace for a city Toronto's size.

I believe the issue becomes how much end user need is there at some point and we may be getting there soon. I understand the rental pool but at some point if sales do outpace the rental/end user demand....investor speculator flippers will presumably not be able to flip at a profit and possibly/probably I would suggest be in a loss situation. If a number of these sell, especially if it hits on masse, and the psychology is that we are in a down market....prices will come down possibly quite drastically.

If the economists / media etc. have it wrong....interest rates do stay low for say 3-5 years, other investments fail to give yield, the number of projects diminishes greatly and the supply of condos as it stands for the next 3 years of projects is not much beyond what will materialize as demand, then those who buy now will be able to rent/sell though the price at which both can be done will remain questionable.

Related to rents: there is only so much the population can afford.
Related to sales: there is still a $75-$100+ gap between resale and new and it remains to be seen if prices will reach even the $600/sq.ft. level suggested here.
 

radioheadmike

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http://www.moneyville.ca/article/1281334--even-toronto-s-condo-boom-can-t-keep-up-with-demand

Toronto renters have become unwitting victims of the condo boom.

There may be a record number of new condo projects on the books, but rental demand is so high and projects are taking so long to build, the number of new investor-owned rental units ready for occupancy isn’t enough to fill the gap, according to condo market research firm Urbanation.

Projects that took just 2.68 years from start of sales to occupancy a decade ago are now taking close to four. And while some 16,000 to 18,000 new units were expected to come on stream by the end of this year, just 13,000 are likely to be completed, says Myers.

That means while there’s lots of digging going on — and endless talk about a condo bubble — too few condos are actually being completed to keep up with rental demand.

Developers cite a host of factors, from smaller build sites requiring more complex design and deeper digging to taller projects requiring more intricate design. Even the reworking of plans has been a factor as projects got the green light for extra floors after sales had already started.

The demand/supply imbalance is playing out in bidding wars for rental condos and prescreening for units that’s almost as rigourous as buying a home.

“I’d never heard of ‘bidding’ for an apartment,” says University of Toronto student David Wallace who spent six weeks looking for a place to rent before starting medical school. “The speed at which things went, I had no idea. They’d be (advertised) one day and gone the next.”

Condo owners are routinely demanding credit checks, proof of salary and job confirmation letters before they’ll even consider a possible tenant, says realtor Mark Savel who helps clients buy and rent condos.

“I get clients asking me all the time, how could we have all these new condos and I can’t find a place to rent? But we have a lot of people coming to the city, we have a shortage of places to rent. I tell them, have all your paperwork ready and be prepared to offer more than they are asking for rent.”

Some developers, like Empire Communities, are now looking to rent out their inventory of new condos that have been slow to sell since buyers started edging to the sidelines last spring.

“No one wants to hold on to real estate, but this is a natural because the rental market is so crazy,” says long-time condo developer Paul Golini, executive vice president of Empire.

“Sales have become slow because people who would typically buy are now waiting to see what happens to the market, hoping to get a deal. They are paying the same amount (for rental condos) as they would for a mortgage, but they are more comfortable not committing to buying for a year or two.”

The rental situation will be a key topic at a Canada Mortgage and Housing Corp. conference Nov. 14. Just from 2009 to 2011, the rental vacancy rate across the GTA has dropped from 3.5 to 1.4 per cent, says Shaun Hildebrand, CMHC housing analyst for Toronto.

High house prices and tighter lending rules are likely to see more people renting longer in the next few years.

There are roughly 10,000 new renter households per year across the GTA, says Hildebrand. “Increases to the purpose-built rental (apartment) stock are negligible and the number of condo rentals has been increasing by less than 5,000 units per year. So you can see where the gap is,” he adds.

Even if condo completions edge closer to 16,000 units, from the 13,000 expected this year, that’s like to mean at best 6,000 new rental condos, he adds.


New condo sales were down 30 per cent in third quarter over the second as developers held back launching new projects while they took a second look at pricing and units sizes in the face of softening demand.

But demand for investor-owned rental condos remains unrelenting as more people look to live and work downtown, and the shortage is unlikely to ease up soon, despite the fact a record 28,000 pre-construction condos were sold last year, says Ben Myers, executive vice president of Urbanation.

It could take about four years before those preconstruction units sold last year translate into real places to live as condo build times get longer.
 

Ric

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http://www.moneyville.ca/article/1281334--even-toronto-s-condo-boom-can-t-keep-up-with-demand

Toronto renters have become unwitting victims of the condo boom.

There may be a record number of new condo projects on the books, but rental demand is so high and projects are taking so long to build, the number of new investor-owned rental units ready for occupancy isn’t enough to fill the gap, according to condo market research firm Urbanation.

Projects that took just 2.68 years from start of sales to occupancy a decade ago are now taking close to four. And while some 16,000 to 18,000 new units were expected to come on stream by the end of this year, just 13,000 are likely to be completed, says Myers.

That means while there’s lots of digging going on — and endless talk about a condo bubble — too few condos are actually being completed to keep up with rental demand.

Developers cite a host of factors, from smaller build sites requiring more complex design and deeper digging to taller projects requiring more intricate design. Even the reworking of plans has been a factor as projects got the green light for extra floors after sales had already started.

The demand/supply imbalance is playing out in bidding wars for rental condos and prescreening for units that’s almost as rigourous as buying a home.

“I’d never heard of ‘bidding’ for an apartment,†says University of Toronto student David Wallace who spent six weeks looking for a place to rent before starting medical school. “The speed at which things went, I had no idea. They’d be (advertised) one day and gone the next.â€

Condo owners are routinely demanding credit checks, proof of salary and job confirmation letters before they’ll even consider a possible tenant, says realtor Mark Savel who helps clients buy and rent condos.

“I get clients asking me all the time, how could we have all these new condos and I can’t find a place to rent? But we have a lot of people coming to the city, we have a shortage of places to rent. I tell them, have all your paperwork ready and be prepared to offer more than they are asking for rent.â€

Some developers, like Empire Communities, are now looking to rent out their inventory of new condos that have been slow to sell since buyers started edging to the sidelines last spring.

“No one wants to hold on to real estate, but this is a natural because the rental market is so crazy,†says long-time condo developer Paul Golini, executive vice president of Empire.

“Sales have become slow because people who would typically buy are now waiting to see what happens to the market, hoping to get a deal. They are paying the same amount (for rental condos) as they would for a mortgage, but they are more comfortable not committing to buying for a year or two.â€

The rental situation will be a key topic at a Canada Mortgage and Housing Corp. conference Nov. 14. Just from 2009 to 2011, the rental vacancy rate across the GTA has dropped from 3.5 to 1.4 per cent, says Shaun Hildebrand, CMHC housing analyst for Toronto.

High house prices and tighter lending rules are likely to see more people renting longer in the next few years.

There are roughly 10,000 new renter households per year across the GTA, says Hildebrand. “Increases to the purpose-built rental (apartment) stock are negligible and the number of condo rentals has been increasing by less than 5,000 units per year. So you can see where the gap is,†he adds.

Even if condo completions edge closer to 16,000 units, from the 13,000 expected this year, that’s like to mean at best 6,000 new rental condos, he adds.


New condo sales were down 30 per cent in third quarter over the second as developers held back launching new projects while they took a second look at pricing and units sizes in the face of softening demand.

But demand for investor-owned rental condos remains unrelenting as more people look to live and work downtown, and the shortage is unlikely to ease up soon, despite the fact a record 28,000 pre-construction condos were sold last year, says Ben Myers, executive vice president of Urbanation.

It could take about four years before those preconstruction units sold last year translate into real places to live as condo build times get longer.

Seems like I wasn't just blowing hot air when I said this 3 months ago.
 

The Condo Observer

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I can attest to this ....a unit in m5v, junior one bedroom under 500 sq feet, no parking rented for 1750 this past summer. I found this quite high and precedent setting as for the longest time 1600 was considered the going rental for a one plus den with parking.
 

Ryan_T

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In light of the above articles, plus these:

http://toronto.ctvnews.ca/report-shows-30-per-cent-decline-in-toronto-s-q3-condo-sales-1.1021576

The following are some additional key points from the report:
- The average unsold condo unit in Toronto was being offered at $573 per-square-foot at the end of Q3, an increase of just two per cent from a year earlier.
- The market for resale condominiums also softened, with transactions falling 32 per cent from 5,050 in Q2 to 3,413 in Q3.
- Overall pricing per-square-foot remained flat compared to Q2, at an average of $407.
- The number of resale transactions for units over $400,000 fell 40 per cent compared to the previous quarter, suggesting new mortgage rules may have steered some buyers away from more expensive properties.
- There was also a 38-per-cent quarterly drop in units traded over 1,000 square feet in size.


Read more: http://toronto.ctvnews.ca/report-sh...onto-s-q3-condo-sales-1.1021576#ixzz2BDGq2ql5


As a novice to the entire real-estate market/world, and prospective first-time buyer, I must ask a serious advice from you experts:

- Should I take advantage of my cooling-off period (Day 5) and cancel my agreement with 88 Scott?




I was convinced it was a solid buy, despite knowing the market is about to, or is already, slowing down. But this is different. With 30% drop in sales compared to Q2, and near 50% drop from Q3 2011, the numbers are not trivial. I intend to move downtown and live in it, so I don't care if the price won't rise. However, I do care greatly if the price is about to drop. Any amount of reduction to my mortgage is highly welcome.

I've been pouring over articles and discussions, but not sure if I'm battling my own bias, or if this is in fact happening. The 30% drop could be a combination of potential buyers holding off because of perceptions, or from waiting for new projects which are now on hold, or both. Either way, I think there's a lot of variables in this, and I'm not sure what to make of it.

Thanks in advance.
 
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