Moving couch

Bricks & Sticks

by Desi Auciello

Desi Auciello is the 2006 GTHBA President, and is also president of Cachet Estate Homes.

Condo Fact and Fiction

Date: February 3, 2006

I expect two things will follow on the heels of recent news that sales of new condo units in the GTA reached an all-time record of 17,693 units last year.

First, I expect we'll hear the usual from the naysayers. Those who will no doubt be heard saying, "demand can't stay that strong. The condo bubble is sure to burst now."

I also know that buyers of new condo units will continue to benefit from the very competitive market we have here in the GTA -- a market where builders are competing strongly on price, building features and quality of interior finishes.

I'm not asking you to take my word on either of the above. Recently, our association asked Jeanhy Shim, president of Urbanation Inc. and one of Toronto's leading experts on the condo market, to speak to us about last year's sales figures and what we can expect this year.

In her presentation, Shim busted the myth that sales of new condos in the GTA are somehow overheated. In fact, the evidence leads her to conclude that sales of new condo units won't fall into a steep decline this year.

"Condominium apartments as a housing form are increasing in terms of their popularity and are now a very significant part of the GTA's housing market," Shim said.

In 2005, condo sales increased to 42 per cent of total new home sales, up from a market share of 33 per cent in 2004.

Another telling statistic from last year -- 81 new condo projects were launched in the GTA, adding 17,350 units to the pool of condo apartments available out there.

And what happened? Strong demand absorbed most of those new units and the supply of unsold inventory increased only marginally.

"Unsold inventory didn't spike, even though we added 17,000 new units. It's quite remarkable if you look at all the numbers and the volume of activity out there. Demand is actually increasing, relative to supply," Shim said.

Another trend that bodes well for the condominium market is growing sales in 905 country. In 2000, 13 per cent of all new condo sales took place in the 905 area. That rose to 24 per cent last year. Shim says it's a sign of the broadening appeal of condominiums.

"We not only maintained the core level of demand in the traditional 416 area, we actually tapped into new demand in the outlying areas. That's quite significant."

And as the market for new condos has expanded, it's also changed.

We're now seeing a growing market of move-up condo purchasers. These are second-time buyers who have some equity or who have a partner now. They've outgrown that starter, one-bedroom unit and now want a condo with a den or second or third bedroom.

Then there's the young professionals with two incomes who work downtown and want to stay downtown as they raise their children. More of these urbanites are choosing condominiums.

"We've started seeing young families with infants or toddlers moving into condos. And this is just the tip of the iceberg," Shim says, noting that several condo projects now selling in downtown Toronto include on-site daycare facilities.

Finally, while affluent empty nesters have long been attracted to the condo lifestyle, Shim says there's new and growing demand by middle-class empty nesters who are downsizing.

All in all, Shim says the notion that we have an overheated condo sales bubble that's about to burst is fiction.

"You can certainly see that the market has really broadened in terms of demand for high-rise condominiums. It's just remarkable the choices out there in the marketplace. It's a great time to be a condo buyer and there's a wide range of products available," Shim says.

For 2006, Shim forecasts condo sales will reach about 12,000 units. A reduction from 2005, true, but Shim says that's still a good number and 12,000 is also the historical average for annual sales of new condo units in the GTA.

At the same presentation, George Carras, president of RealNet Canada Inc., pointed out that 2005 held another milestone for the home building industry.

With condo sales rising to 42 per cent of all GTA new home sales, for the first time, demand for condominiums has outstripped demand for single-detached homes, which made up 35 per cent of new home sales last year.

"Detached has been dethroned in 2005. Condos are now our No. 1 product for new housing," Carras said