Condominiums under construction near Lakeshore Boulevard West and Park Lawn Road.Fred Lum/the Globe and Mail
Something different has been happening in the condo presale market: all but one of the 39 projects that launched sales in the second quarter of 2019 did so with nearly complete site-plan approvals and permissions.
That’s according to market research firm Urbanation Inc., which noted the trend in its quarterly report. According to Pauline Lierman, Urbanation’s director of market research, the firm hasn’t been tracking projects with approvals on a quarterly basis and so can’t provide a quarterly breakdown of the trend. But one way to think of how different the quarter looked is to take a look at the record-breaking year of 2017, which saw 104 condo projects launch and only 42 per cent of them started sales with planning approvals in place.
According to public relations professional Danny Roth, president of Brandon Communications, the shift is real and it’s a sign of health in the market. Mr. Roth said the “continental” success of Toronto’s condo construction business has one essential ingredient: trust.
“Asking people to spend hundreds of thousands dollars off plans, and sometimes off slick sales material and presentation centres … that model requires a de facto agreement between purchasers and developers,” said Mr. Roth, who works with some of the city’s biggest developers on media campaigns. “I can’t think of any other product that is sold that way. Even an expensive car, you can drive that car off the lot.”
Going to market with all planning approvals in place has always been common, said Mr. Roth, who has worked in the building industry since 2003, but there are usually a significant number of projects that launch while still awaiting some clearances. That may have changed with the wave of project cancellations that followed the housing frenzy of 2016 and 2017. There have been more than 6,350 condo apartments cancelled since 2017 in the GTA – more than 4,000 in 2018 alone. But so far, 2019 is not expanding that trend: only four projects that add up to about 600 units have been cancelled.
On Aug. 29, the court-appointed monitor handling the insolvency of Forme Development Group sent pre-purchasers a note that Tarion, the Ontario home warranty provider, is reviewing its application to cancel the 279-unit project at 250 Danforth Rd., which would mean buyers would soon see their deposits returned.
Cranes and heavy equipment work on the site of the River City Phase 3 development on Feb. 4, 2016.Fred Lum/The Globe and Mail
“Certainly the headlines and the fact that cancellations became part of the public discourse has made assuaging those concerns part of the sales and marketing message,” Mr. Roth said. Even for developers who have never cancelled a project because of poor planning or lack of financing, reassuring consumers is more necessary than ever. “I think the biggest threat is if the consumer no longer believes the promise you made at the time of sale.”
The location of new projects in the second quarter also shifted, out of 39 launches 17 were in 416 area codes and 22 were in the 905. The number of units for sale and the percentage sold also favoured the 905: 5,978 units were launched in the 905 and 72 per cent sold at an average price a square foot of $798. In the 416, only 4,870 units came up for sale and just 53 per cent sold at an average price of $1,078 a square foot.
Sales were still up year over year, 10 per cent in the 416 and 21 per cent in the 905, but the shift shows that pricier 416 condo launches may struggle to sell quickly. As an example, Urbanation’s research for the quarter found new entrants Broccolini, the Montreal-based developer that is preselling its first residential high rise in Toronto in the Corktown neighbourhood, had the lowest per cent of units sold in the Greater Toronto Area (GTA). With 580 units in the River & Fifth building, about 25 per cent had been sold (at a price of $1,125 a square foot) during the quarter. (Broccolini disputes that analysis and said through a spokesperson that it had only offered a limited number of units to select buyers and has now sold 194 units, or 57 per cent of the total available.)
There were other projects Urbanation highlighted that showed some signs that higher prices can slow down buyer uptake, particularly in cases when the prices rise above $1,000 a square foot. The MOD Developments project at 55 Charles St. E. was selling at $1,399 a square foot and had sold about 39 per cent of its 551 units. In North York Capital Developments’ King’s Landing south tower sold 38 per cent of 247 units with $1,150 price a square foot. However, some expensive projects did just fine: Davpart Inc.’s United Building at 88 Centre Ave. sold 60 per cent of its 459 units at $1,726 a square foot, and another Capital Development’s project – Azura at 15 Holmes Ave. – sold 98 per cent of its 358 units at $1,001 a square foot. The Tretti project from Collecdev, near the Wilson Road subway station, has sold out 100 per cent of its 290 units; its prices averaged at $880 a square foot.
Urbanation’s results may show the market is settling into something that’s more normal after recent wild gyrations. There were 14,587 unsold units on the market in the second quarter, which is up 46 per cent year over year, but that’s still 6 per cent below the 10 year average. There are more than 69,000 condo units under construction in the GTA now.
Your house is your most valuable asset. We have a weekly Real Estate newsletter to help you stay on top of news on the housing market, mortgages, the latest closings and more. Sign up today.
Shane Dingman