New condominium apartment sales in Toronto fell 30% in the third quarter from the second quarter, Urbanation Inc. said Thursday, another sign the condo market in Canada’s biggest city has topped out in the wake of the Canadian government’s efforts to guard against as U.S.-style, real-estate meltdown.
But at the same time developers are getting the message and slowing construction activity to meet the reduced demand, the Toronto-based condo market research company found.
Concerned in particular over the prospect of a potential housing bubble forming in Toronto and Vancouver amid a condo building boom in the two cities, Canada’s Finance Minister Jim Flaherty this summer tightened mortgage-lending rules to guard against an overheating market.
In a release Thursday, Urbanation’s findings suggest the government’s moves are working. New condo apartment sales fell 30% to 3,317 in the third quarter from the prior period, and unsold units were being offered at 573 Canadian dollars per square foot at the end of September, “an increase of just 2%” from the year-ago period, Urbanation said. The condo resale market also slowed in the third quarter, with sales down 32% from the second quarter, the group said.
Last month, Greater Toronto Area Realtors released figures supporting this trend. The group reported at 20.5% drop in condo and apartment sales in the third quarter and average condo selling prices that were largely in line with the year- ago period.
In another sign of cooling market conditions, those buying condos appear to be settling for smaller places as a result of belt tightening.
“The change in the mortgage insurance rules may have forced many buyers to settle for smaller units than they had previously desired,” Ben Myers, Urbanation executive vice president, said in a statement. “The number of resale transactions for units priced over $400,000 fell 40% compared to last quarter, while there was a 38% quarterly drop in units traded over 1,000 (square feet).”
Against this backdrop, the average condo project in which construction has been completed so far in 2012 took 3.85 years from “from sales launch to occupancy,” compared with 2.68 years in 2003, Urbanation notes.
“The share of unsold inventory in Toronto….remains below the 10-year average,” Urbanation said.
That said, the slowdown in new condo sales represents a potential boon for existing owners who want to rent out their places.
“The reduced level of project completions has contributed to a very tight condominium rental market,” Urbanation said.
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With the improving economy and people getting back into buying and selling condos again, the Toronto Condo market is back on track.
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