Report shows 30 per cent decline in Toronto's Q3 condo sales

Toronto's condo market struggled in the third quarter of 2012, according to a new report this week showing a significant decline in sales from the previous quarter.

According to the report from Urbanation Inc., there were 3,317 new condominium apartment sales in the Toronto Census Metropolitan Area in Q3 -- a drop of 30 per cent from Q2.

The report said slowing sales, along with record levels of unsold inventory, prompted a quick reaction from developers who delayed project launches.

"Just five projects launched in Toronto in Q3-2012, as developers chose to review their pricing assumptions and unit mix," Ben Myers, executive vice-president of Urbanation, said in a statement.

However, the reduced number of Q3 project launches did have a positive impact on the city's condo inventory. The total number of unsold units dropped to 17,182 from a record high of 18,123 in the second quarter.

The third quarter of 2012 also marked the eighth-straight quarter that condominium apartment starts have outpaced completions. According to the report, 207 projects were under construction, comprising 56,336 future units.

"The number of unit completions in 2012 are well below our forecasts, as construction delays have pushed back occupancy on a number of projects," said Myers. "The average project that completed construction in 2012 took 3.85 years from sales launch to occupancy, compare that to 2003, when the average took just 2.68 years for a similarly sized project."

The following are some additional key points from the report:

• The average unsold condo unit in Toronto was being offered at $573 per-square-foot at the end of Q3, an increase of just two per cent from a year earlier.
• The market for resale condominiums also softened, with transactions falling 32 per cent from 5,050 in Q2 to 3,413 in Q3.
• Overall pricing per-square-foot remained flat compared to Q2, at an average of $407.
• The number of resale transactions for units over $400,000 fell 40 per cent compared to the previous quarter, suggesting new mortgage rules may have steered some buyers away from more expensive properties.
• There was also a 38-per-cent quarterly drop in units traded over 1,000 square feet in size.

Urbanation predicts 28,000 unit completions will occur in 2013, which could add as many as 14,000 new condominium rental units to the Toronto CMA, via private landlords purchasing condos as investment properties. That would represent a massive 25-per-cent increase in the number of condominium rentals in the Toronto CMA.