The Number of Unsold Condos in Toronto Is Raising Red Flags

Toronto's condo sector has been seeing an increase in newly built condos but the number of unsold condos are raising red flags for some industry watchers and observers. Benjamin Tal, Canadian Bank of Commerce economist says those who see the trend as a sign of a condo bubble about to burst "are barking up the wrong tree."

There are 2,000 completed, but unsold condos in the Greater Toronto Area, Mr. Tal wrote in a research note released Monday morning, about double the number there were in December, and above the long-term average for the region. Nearly half of those are in the City of Toronto. Many are the echoes of record levels of housing starts in 2012, when developers began construction on 50,000 homes, of which 30,000 were condos.

Benjamin Tal says that the high levels of unsold units are not a region-wide situation. He said that a quarter of unsold condos are in just five buildings, out of 139 active projects, he says. While, he dismisses the idea that Toronto's condo market is facing "increased vulnerability," he does see stiff headwinds ahead for the sector. "To be sure, the GTA's condo market will be tested as interest rates start rising in the coming years, and increased resale activity from domestic condo investors will result in excess supply and some downward pressure on prices," he writes.

Meanwhile, Vancouver is facing the opposite issue. The number of completed but unsold condos in the city has fallen from more than 2,000 last year to 1,100 this year, the lowest in five years.

Reference: The Globe and Mail

http://www.theglobeandmail.com/…/number-of…/article26969718/