A Canadian economist, Robert Kavcic of Bank of Montreal, has reported a decline in local condominium construction, which could be good news to economists in Toronto. With a slowing of the cranes and a quieting of construction, the local market could get a much-needed breather for now. A quick glance at the current pre-sales on the market shows that there are more than one hundred different condominiums available. That is a staggering number of options for buyers and investors. Add in the additional one hundred plus options for condominium re-sales and it is easy to see why there is concern about the rapid rate of the rise of buildings in and around Toronto.
While construction may seem to be slowing, with less than 20,000 units under construction this year as opposed to 40,000 units in 2012, there is certainly an ebb and flow to the condominium timeline. The most important factor to consider with the condominium market is how the process takes place, from start to finish. Construction is first slated to occur with planning and permitting, as well as pre-sales. Typically, bank financing requires that a developer pre-sell up to approximately seventy percent of the condominium units before construction can begin. The pre-sell process can take more than a year for some developers. Once approved, the project can get underway with construction. Timelines range from eighteen to twenty-four months to longer for completion of a project and then when the units are finally completed, the keys are handed over to tenants, whether they are owners or renters.
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Condominium sales rebounded with robust sales in the first half of 2014 by more than sixty-five percent. By mid-year, there were almost 30,000 units in pre-construction, which means that construction and then sales will grow again. So while there may seem to be a lag for now, that may not be the case for long. Overall, Toronto seems to be set apart from other Canadian cities in that it has typically been below demographic need as far as housing demands in the real estate market. So while it may seem as though there are far too many housing units, in particular condos, on the market or coming to market, the construction continues to necessitate the demand and surplus supply of new builds does not appear to be an issue. At least for now.