As you no doubt know, the GTA condo market is on fire. This is good news for us in the industry, but does raise important questions, such as how long will prices continue to rise, and more importantly, whether we’re facing a bubble that could burst anytime.
Last Thursday, I attended a high-rise forum analyzing the GTA condominium market. Organized by BILD, the forum sold out quickly, which is hardly surprising given the significance of the topic at hand.
So if you couldn’t make it to the forum, you’ll likely appreciate the following summary.
According to a Condominium Market Survey that Urbanation carried out last December, 53% of developers, lenders, brokers and consultants surveyed worry about price growth.
Little wonder: the sold index pricing in the Toronto census metropolitan area is up 8% annually to $509 per square foot, compared with $388 per square foot only 4 years ago.
Of course, as the price has gone up, so has the investors’ share of sales, which may reach as much as 80%, according to some in the industry. Indeed, investors are now seeing an increase in incentives designed to lure them rather than homeowners, such as lower down payments, capped closing costs, and guaranteed rental programs.
The problem with rentals is that condo rental appreciation isn’t keeping up with the new index price growth — in fact, index rents declined in the first quarter of last year.
Add to this decline the possibility that investors will experience less price growth, and you get a scenario that could see the Toronto condo market disrupted.
In the end, although we may not have to endure a bubble burst, it pays to act in a way that will mitigate the risks. Possible measures include:
- Keeping 15% to 20% deposits for all units regardless of projects’ percentages sold, eliminating extended deposit structures,
- Eliminating free or inexpensive assignments, and
- Keeping broker commissions at 4%.
What are your thoughts on the GTA condo market?
JohnAmardeil.com 