Navigating Toronto's new condo market: Insights from the industry's newest president

The GTA new home market has experienced a challenging start to 2024, with April recording a low level of new home sales, second only to the pandemic-impacted April 2020. According to BILD and Altus Group, there were only 1,105 new home sales in April, marking a 56-per-cent decrease from April 2023, falling 65 per cent below the 10-year average. Condominium apartment sales were down 64 per cent from the previous year and 75 per cent below the 10-year average.

The softening pre-construction sales market underscores a critical need for action to boost much-needed housing supply. Justin Sherwood, senior vice-president of communications and stakeholder relations at the Building Industry and Land Development Association (BILD), emphasized the urgency for government intervention to balance the market and address the anticipated resurgence in demand. The high interest rates create a critical situation that could lead to an acute housing shortage in two to three years unless measures are taken to increase density and speed up approvals.

Challenging conditions

Samuel Frum, the new president of Metropia, discussed these challenging conditions on The Toronto Under Construction podcast. A significant point of discussion was the perceived “bubble” in the highrise sector around 2021-22, and how the market is readjusting and resetting price levels. Frum emphasized the resilience and adaptability of the industry. He highlighted Metropia’s success with certain projects, attributing it to a nuanced approach to underwriting and market assessment, and their quick response to overwhelming demand despite the slow market.

Metropia had the most successful project in terms of sales last year, despite the fact that the GTHA multi-family market faced one of its most challenging years in two decades in 2023. According to Zonda Urban, annual sales were down 36 per cent from the previous year to 14,947.

In order to navigate the current market correction, Frum mentioned that Metropia hired a top sales and marketing executive, reflecting its commitment to infusing fresh ideas and maintaining a competitive edge. Frum emphasizes the importance of investing in multiple asset classes and has been focusing on the low-density market, with end-user demand waiting on the sidelines for the right project and price point.

Recurring theme

Partnerships also play a significant role in Metropia’s strategy. Frum looks to leverage the knowledge base, capital and banking relationships of long-standing partners with the proactive pursuit of new partnerships to ensure they take every small advantage in a market where margins have become thinner and buyers have become scarcer.

A recurring theme in the discussion with Metropia, and by industry advocates such as BILD, is the challenge of housing supply and affordability in the GTA. The disparity in construction costs between highrise downtown buildings and suburban townhouses, as highlighted by Altus Group’s construction cost guide data, poses significant challenges. Suburban single-family land is in short supply, and NIMBYs and their political allies continue to demonize condos and highrise apartment living. These actors have lengthened the approvals process and resulted in many projects not making it to market.

Frum’s perspective on housing supply emphasizes the need for a diversified portfolio that includes various types of housing, from tall towers to detached homes. This diversity is essential for meeting the changing needs of the market and addressing affordability concerns. However, he has seen a change in attitude over the last few years among planning departments, which appear to be more willing to grant higher densities and more floors to proposed apartment projects.

Market dynamics

The discussion also touched on the role of investor-owned properties in the new condo market. Frum argues that investors are integral to the development process, providing necessary sales to secure construction financing. He stresses the importance of educating the public on the positive role of investors in increasing housing supply and supporting market stability.

For new-home buyers and investors, understanding these market dynamics is crucial for making informed decisions and capitalizing on the opportunities that lie ahead. Many developers are looking to keep their employees working and engaged and are willing to launch projects with lower starting prices, intent on raising prices aggressively as the project moves forward. There will be opportunities to take advantage of those early deals, but doing your research in advance and understanding market value and future growth prospects will help you make those decisions quickly. Good luck