"Astounding." That’s Urbanation SVP Shaun Hildebrand's take on red-hot Toronto real estate. A record-high 6,677 condos sold in Q3, but Shaun says "it's the strength of the market overall."
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We snapped Shaun following his Q3 results presentation to industry insiders last week at the Waterworks Building at 505 Richmond St W, site of a new MOD Developments and Woodcliffe Landmark Properties project that'll include condos and a food hall. Toronto's condo market is scorching, with Q3 sales surpassing the previous highs hit in 2011 and 2007, Shaun told his audience. Year-over-year, there’s been “ridiculous” 73% growth in sales, and on a rolling 12-month basis, the GTA has seen 26,000 new condo apartments sold. “We’re right back to where we were when the market peaked in early 2012.”
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Cresford's Halo Residences (above) was Q3’s top seller, with 402 of 413 units snapped up since its September launch. Second was Rodeo Drive by Lanterra Developments, followed by Great Gulf’s 8 Cumberland (below). The record sales activity is remarkable, given how few project starts there’ve been in 2016: just over 12,000 units launched year-to-date. “We’ve never seen a gap like this before,” Shaun said. “Supply can’t keep up.” Unsold inventories have plummeted to a decade low, down 33% year-over-year to a five-month supply of 11,455 unsold units. "It’s creating lots of opportunities for new projects and little competition among existing sites selling units today."
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There’s been much ado about foreign buyers driving up prices. To assess the situation in the GTA, Urbanation surveyed condo developers about project-buyer profiles. Shaun's team found on average 5% of units were purchased by investors residing outside Canada. By comparison, 52% of builders’ units were sold to local investors. Some are recent immigrants, Shaun said, but most aren't buying on spec—they’re holding on to units due to modest, 2% to 3% growth in condo prices. If Ontario wants to follow BC's lead and introduce a foreign buyer tax, he said, “it won’t do much other than impact confidence.”
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Condos aren’t the only hot ticket. Shaun, whose firm acquired The Marsh Report, pointed to $14B in land/building sales so far in 2016. “It’s been the year of the office,” with $4.8B in office building buys to date (versus $1.3B total in 2015). Key deals include CPPIB taking a 50% stake in Richmond Adelaide Centre ($1.3B), above, and the sale of a 50% interest in Scotia Plaza ($1.2B). Rental building acquisitions are down: 3,700 units were bought YTD as price per suite has risen to $177k. So doing new purpose-built rental projects (which are at a 25-year high, with 6,000 units under construction) “makes more economic sense than acquiring existing assets.”
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