Toronto Condo Market, GTA real estate, Greater Area apartments, Ontario property developments
What Do Slowing Sales and The One’s Receivership Mean for the Toronto Condo Market?
18 November 2023
Toronto has been one of the hottest real estate markets in the world for years. Year-over-year price increases were in the double digits for years, while a quickly growing population and general housing shortage promised strong fundamentals for the real estate sector for years to come.
That market is finally facing some headwinds. The Bank of Canada has been aggressively raising interest rates, implementing 10 rate hikes in a row between March 2022 and July 2023. While those rate hikes have slowed down in recent months, the real estate market is catching up to the higher cost of borrowing.
Toronto Condo Sales Are Slowing
High interest rates have significantly slowed down condo sales in the city. Sales are down 12.8 percent compared to the earlier part of 2023, but prices have only fallen by around 6 percent. That’s not enough to address serious affordability issues. In effect, the high prices of both condos and borrowing have priced too many buyers out of the market, as fewer people are willing to take on the risks.
High prices and rising interest rates have shifted the economics for investors, who are responsible for a significant portion of sales. Despite the high price of Toronto condos for rent, market rents aren’t enough to make renting out a condo profitable any more.
Real estate investors who aren’t able to be cash flow positive are unwilling to put their money into real estate, and they won’t until either real estate prices fall significantly or interest rates start to climb back down.
It looks like Toronto may be finding out just how high rents can go. At a certain point, there’s only so much that renters are able to pay without overcrowding, and that price point is putting a cap on how much investors are willing to put up with high interest rates.
The One: Is Receivership a Cause for Concern?
The biggest news coming out of Toronto real estate lately has been luxury condo project The One going into receivership. The 85-story luxury condo project going up at Yonge and Bloor, one of the busiest intersections in Toronto, was forced into receivership by lenders after the developers failed to make payments on their expanding debts.
By the time the project fell into receivership, developers Sam Mizrahi and Jenny Coco were up to $2 billion in debt, nearly $600 million more than expected costs.
Construction delays played a major part in the project’s fate, and the decision by Apple to pull its plans for a flagship store in the development didn’t help either.
The project now seems to face an issue where the price of condo presales isn’t enough to finish the project, and buyers who got in early may be faced with forking over even more money if they want to see the project come to completion.
All in all, The One seems to be an issue with the developers rather than a sign that more is to come in the Toronto condo market. While sales are slowing, The One is more of an isolated incident due to mismanagement than any sign of a coming bust.
Commetns on this guide to Toronto Condo Market article are welcome
Houses in Toronto
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Ontario Architecture News on e-architect
New Ontario Properties – recent selection from e-architect:
Mila Sales Centre, Scarborough
Design: dkstudio architects inc.
photo : Michael Muraz
Mila Sales Centre Scarborough
Sheridan College Hazel McCallion Campus Phase 2A, Downtown Mississauga
Design: Montgomery Sisam Architects in joint venture with Moriyama & Teshima Architects
photo : Montgomery Sisam Architects
Sheridan College Hazel McCallion Campus
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