Why is the Toronto condo market hard to predict?

By Ben Myers
December 02, 2014

Toronto condo market outlook

With 2014 drawing to a close, I wanted to take a look back at the year's Toronto condo market, which was solid for everyone involved. From January to October there were more than 18,600 new condominium apartment sales in the GTA according to RealNet Canada Inc., an increase of 42 per cent over 2013. With two months of activity left to track, the 2014 sales have already surpassed the forecasts of Will Dunning Inc. (13,950), Urbanation (15,500), my Fortress forecast (16,250) and Central1 Credit Union (16,400).

With the top analysts missing on their forecasts for another year, it begs the question: Why is the Toronto condo market so hard to predict? I’ve been reading an interesting book called Naked Statistics by Charles Wheelan, which has a great paragraph where he provides his answer to the dilemma of data analysis. “Even in the best of circumstances, statistical analysis rarely unveils ‘the truth.’ We are usually building a circumstantial case based on imperfect data. As a result, here are numerous reasons that intellectually honest individuals may disagree about statistical results or their implications.”

Toronto has great real estate data, but not perfect data, and even if it was flawless information, it is often how data is presented and manipulated that can alter the consumer’s opinion on it. For example, as of Q3-2014 there were 16,210 unsold new condominiums in the Toronto CMA, according to Urbanation. Seems like a lot, right? However, on a percentage basis, just 15.7 per cent of the market is unsold – the lowest level in over 25 years!

The Toronto condo investment market is booming. According to the Toronto Real Estate Board there were nearly 8,000 condominium units leased in Q3-2014, a 20-per-cent increase from a year prior. Despite this major increase in activity, average monthly rental rates declined annually. However, the better way to examine the rental rates is on a per-sq.-ft. basis, which shows rents increasing year over year!

There is so much data out there and so many opinions, it is very hard to make an accurate prediction about the Toronto condo market. The exact same data is often being interpreted negatively or positively, based on the preconceived opinion of the person doing the analysis. I’ll leave you with one piece of data to mull over: the last time fourth-quarter pricing was lower than the year prior in the new condominium market was 1996 (per Urbanation). Index prices have increased 218 per cent since the end of 1996.

Forget about trying to predict the Toronto condo market, and just find yourself somewhere great to live. Happy condo hunting and happy new year!

About Ben Myers

Ben Myers is President of Bullpen Research & Consulting, a boutique real estate advisory firm, that works with landowners, developers, and lenders to better inform them of the current and future macroeconomic and site-specific housing market conditions that can impact their active or proposed development projects. Follow Bullpen on Twitter at @BullpenConsult or find Ben at bullpenconsulting.ca

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