Why have new condo predictions in GTA been so wrong?

In 2011, there were about 28,000 new condominium apartment sales in the Greater Toronto Area, smashing the previous record high. For years all we heard was that Toronto was overbuilding condos, and that eventually the oversupply would drive down prices. That didn’t occur.

We also heard repeatedly that investors would sell off their units at the first sign of soft sales, flooding the market with listings and driving down values. In 2013, the new condo market was experiencing much slower absorption (about 12,000 annually, per Urbanation figures – a nearly 60-per-cent drop from two years earlier), and there was no massive sell off by investors in the resale market or via assignments. Strike two.

There were numerous articles warning of rampant speculation in the new condo market in 2015; so-called experts were positive that new home product was way overvalued. Pundits claimed as soon as capital appreciation slowed, the market would be doomed. Well, new and resale condo prices hardly grew in 2015. The Toronto condo market survived, and values are $200 per-square-foot higher today than they were in 2015.

In 2016, all the talk shifted to foreign buyers – the new condo market was being propped up by purchasers from China was a common refrain. If a tax was applied for offshore buyers in Toronto, the new condo market would tank. In April 2017, a new tax on non-residents was implemented. Did sales plunge? Nope – there was a new record high of 35,000 new condo sales last year. Despite their terrible predictions, many of these folks continue to be quoted on a regular basis.

With expanded rental control in place, tougher mortgage rules and rising interest rates (and more to come), I expected sales of new condominiums, especially the high-priced projects in Toronto’s core, would slow noticeably in 2018. Nope, wrong again. Data for January data showed huge popularity for big projects such as Great Gulf Homes’ 357 King St. and Plaza’s Theatre District Condominiums. Both are priced at more than $900 psf in the Entertainment District, and apparently real estate brokers are fighting over units.

At this point, people are running out of ideas about how this seemingly never-ending bull run in the new condo market might end. How about a Trump trade war driving up construction costs? Overaggressive inclusionary zoning policies? Changes to the Ontario Municipal Board? Who knows. The market has been unbelievably resilient since the late 1990s.

My advice is to do your own research, buy what you can afford and hire a good realtor to help. Good luck.