A pedestrian walks by 250 King St. East, in Toronto on May 17.Tuan Minh Nguyen/The Globe and Mail
Real estate developers are launching hundreds of new condo units in the Toronto region this year, as buyer demand grows after months of fretting over higher interest rates.
Ever since the Bank of Canada announced in late January that it would take a break from hiking interest rates, activity in the residential real estate market has started to rebound.
Preconstruction homes are those that have yet to break ground or are under construction, and sales for these projects are often viewed as a bet on the future, because buyers wait years for their units.
“We are seeing the momentum pick up,” said Kash Pashootan, chief executive of Emblem Developments Inc., which launched a 43-storey condo building called Allure with about 500 units in the heart of the city earlier this month.
Emblem is also getting ready to launch 241 condo units in midtown Toronto in mid to late June. “As there was less uncertainty with where rates were going, that really gave a strong footing for buyers to make long-term decisions,” Mr. Pashootan said.
Daniels Corp. recently launched the third phase of its Keelesdale project in the north part of the city, which will eventually include 637 condos and townhouses.
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Daniels vice-president of sales Dominic Tompa said within weeks of the Bank of Canada announcement, there was a noticeable change in buyer sentiment. He said there was increased traffic to his company’s website, more phone calls and more sales. Now, he said, “sales are a lot more brisk than before.”
Mr. Tompa said the two main groups of buyers are back: those looking for a home to live in and investors. He said investors are keen after hearing about how quickly rent has risen and the level of immigration in the Toronto region. “They see that these are really good long-term investments,” he said.
Altree Developments is getting ready to launch a 10-storey condo project called Kingside Residences with 156 units in late May, after delaying the launch late last year when the housing market was at a near standstill.
“Our team has been extensively watching the market, and the pickup in the [preconstruction] sales market factored into the decision to bring our Kingside Residences to launch at the end of this month,” said Jordan DeBrincat, Altree’s vice-president.
“There is no question that there was definitely a slowdown in the market in the latter half of 2022, which prevented a lot of developers, including ourselves, from holding off launching any new product,” she said.
Metropia is getting ready to launch another tower in an area north of the city after selling 800 condo units in two weekends. The project, called Union City, is close to public transportation and York University’s Markham campus, north of Toronto.
“For us to sell 800 units in essentially two weekends bodes well for the industry,” said Metropia CEO Howard Sokolowski, adding that the project benefited from its location.
The company’s quick pace of sales is reminiscent of the COVID-19 real estate boom in 2021, when a project would sell out within 48 hours. However, developers do not expect a return to that frenetic level and have been adjusting their sales timelines.
Mr. Pashootan said Emblem now factors in a longer period of time to sell a project. Prior to the slowdown, he said his company expected to sell 70 per cent of its project within six weeks. Now, the timeline is about six months.
Ms. DeBrincat said Altree now expects a “more traditional” sales timeline, as opposed to selling out in a few weeks, as happened in November, 2021, when the company sold 90 per cent of one project within a few weeks. When Altree launched the second building in May and June of 2022, it sold about 50 per cent of what it released to the public within a few weeks.
She said the climate last year indicated that the market wasn’t necessarily there – when Altree’s existing product did not move as quickly it had hoped. “That was the main reason to hold off on bringing new product to market,” Ms. DeBrincat said.
Developers are also making it easier for buyers to purchase preconstruction units by spreading out the payment needed to secure a property, and in some cases lowering it. Typically, a buyer must provide a down payment equivalent to 20 per cent of a unit’s purchase price. The buyer then pays the remainder after the condo is built.
Emblem is advertising 5 per cent by early January next year, another 5 per cent in January, 2025, and 5 per cent on occupancy. Daniels is advertising a deposit as low as 10 per cent for its Keelesdale project. An outside spokeswoman for Daniels said the 10-per-cent deposit has always been offered for this project.
The turnaround in the preconstruction market is expected to be reflected in the second quarter. In the first three months of this year, new condo sales were down by 74 per cent compared with the same period last year, according to industry research firm Urbanation Inc. That marked the slowest first quarter since 2009, when the global economy was reeling from U.S. housing bust and Wall Street meltdown.