According to a Scotiabank report, there are “emerging signs” of an oversupply of condos in the GTA market with a higher than average stock of unsold properties.
Looking at the number of projects running or in the planning process, one can see why there are concerns. There were 286 projects being marketed by the end of 2010, the most in all of North America. Moreover, in the 2nd quarter of this year Toronto is slated to see an estimated 40 new projects with more than 9,500 units become available (also see the condo boom in North York).
So far condos are holding their value. The asking price of a condo in the GTA was $530 a square foot which is equivalent to half a million dollars for a 1,000 sqft unit. The rising prices, if they continue despite the concerns, could squeeze first-time home buyers out of the market and reduce the profit margin for condo investors, a huge component in new sales.
According to Benjamin Tal, Senior Economist at CIBC World Markets, there could be a concern for the Toronto Market in the short-term considering the available supply of units. However in the long run condos are still attractive to Baby Boomers and those who want to live in Urban Areas.
More supply can put downward pressure on pricing and in the future could…
- Impact rents. More supply, means more competitive or lower rental pricing.
- Impact investors. Condos are no longer holding value so they off load their condos.
- Impact home buyers. Potential to pickup devalued properties as supply comes on stream.
It’ll be interesting to see if we can top last year’s accomplishment for the 2nd best year for condo sales on record.———————————————————————————————————— Related Article: Global Property Investors Now Eye Toronto ———————————————————————————————————–
Source: The Toronto Star