Canada’s real estate markets have largely recovered from the minor slump that began last year, but recent data on condos suggests new trouble could be on the way for some high-rise markets.
The slump appears to be hitting central Canada in particular, with Montreal, Ottawa and Toronto seeing their condo markets under pressure.
Research firm Urbanation projected Wednesday that Toronto will see 13,000 new condo sales this year, a 27.7-per-cent drop from the nearly 17,997 sales seen in 2012, and down by more than half from the peak year for condo sales, 2011, when 28,190 units were sold.
Urbanation said sales in the third quarter were down eight per cent from the same period last year, despite the fact that the third quarter of last year was seen as a particularly weak period for sales, due to new, tougher federal mortgage rules.
“The softer numbers this year should be viewed in the context of the exceptional strength that preceded them,” Shaun Hildebrand, Urbanation’s senior vice president, said in a statement.
Hildebrand suggested there is no need to panic about Toronto’s market, because “the industry continues to make the necessary adjustments to maintain stability.”
But many observers see a serious overbuilding problem in some of Canada’s condo markets.
Ottawa has seen its supply of condos on the market rise to an all-time high, and prices are beginning to drop, the CBC reports. Developers in Canada’s capital are are responding by cancelling or postponing new developments. Some condo developers were only able to sell 10 per cent of planned condos in pre-sales.
“I think it’s a story really of developers maybe being a bit aggressive in the pace of construction and the demographics at this point just don’t warrant it,” market analyst Ben Rabidoux told the CBC.
Developers in Montreal are also pulling back after less-than-impressive demand for new condos this year.
“There’s starting to be a lot of uncertainty in the marketplace,” Sam Scalia, CEO of developer Samcon, told the Wall Street Journal.
The average number of pre-sales in new condo buildings was just nine this year in Montreal, compared to 16 last year. The number of listings on Montreal’s condo resale market have jumped 24 per cent this year, while sales have fallen 15 per cent, the Journal reports.
But while sales numbers are tanking, prices largely remain stable, at least for now, thanks in part to continuing low interest rates. Toronto condo prices are down only about 1.5 per cent over the past year, RealNet recently reported, while Urbanation says the per-square-foot price in Toronto is up about two per cent on the year.
Developers’ moves to slow down construction of new condos could be good news for condo prices, as supply slowly falls back in line with demand. But Toronto will see an all-time record high number of condo units coming online in 2014, so condo sales and prices could see more downward pressure in Canada’s largest city.