There is so much nonsense written about the new housing market in the Greater Toronto Area (GTA), you have to be very careful. The so-called experts tell you not to buy a new home, as the only people who buy new homes are speculators and foreign investors, and you’ll end up in a building of empty units and renters. While technically such a scenario may be possible, 99 per cent of those units are leased out, and the tenants are paying the high rents that a new building commands.
It was announced in early November that a very high-design new condominium project was canceled, purchasers will receive their deposits back with interest, but missed out on the chance to live in such a stunning project. Buyers also missed out on value appreciation in the market since they purchased. The anti-development crowd is quick to jump on such news to try to convince people that new developments are extremely risky.
I wrote a blog a couple years ago entitled “Low-Rise is Low Risk” that showed that 99 per cent of units in new single-detached subdivisions launched to the public between 2000 and 2013 were actually built. However, the share is lower for highrise condominiums at 88 per cent (based on data from Canada Mortgage and Housing Corp. and The Altus Group). Recent Altus data shows that 532 new condo projects came to market in the GTA between the start of 2013 and September 2017, and 35 have been canceled (seven per cent).
For more than a decade, people have been calling for a crash in the new condominium market, citing oversupply, too many investors, overleveraged purchasers, greedy developers and offshore capital. They’ve been wrong for 10 consecutive years. Many housing bears recommend waiting for prices to come down. However, if you’re in a new home sales office looking at a price list, those prices are likely the lowest you’ll ever see for units at that project. Developers might offer some decent incentives if the market slows, but they rarely decrease prices to entice prospective buyers; sales is all about creating a sense of urgency.
If you buy a new single-family home or condominium apartment, there is a slight chance it will not come to fruition. Developers can get caught up in approvals for various reasons, and some run into trouble securing construction financing.
But if you know the actual data in its proper context, you can make an informed decision.
There is a lot of nonsense being spread about the new housing market, much of it spewed by folks with little knowledge and no experience in the sector.
Whenever someone is quoting numbers, especially percentages, ask them about the long-term context of that data before agreeing or disagreeing with their statements and conclusions. There are a lot of figures out there to digest, so do your research.