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An 'Astounding' Q3 For GTA Real Estate

"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."

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.”

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."

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.”

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.”