Ghost Condos in the GTA

The condo market has been booming for a generation in Toronto with a tiny blip recorded in the 07-09 slowdown.

Condo flipping made thousands of savvy investors healthy profits throughout this boom, while our skyline has been transformed and developers raked in huge amounts of money. Condos were unheard of until the late 1970s but their value to investors became apparent as they are significantly more profitable than building apartments and collecting rent long term. 

For many, if not most Torontonians, condos are the only way to get a roof over their heads. They are far more affordable and plentiful than detached homes and townhouses. Condos aren’t simply a place to live in, they are also fully financialized assets, similar to stocks, bonds, and tax saving vehicles. Statistics Canada released data in early July of this year which shows that almost 40% of Toronto condos are not owner occupied. This means they are empty, rented out, or used a second property. For many international investors, a condo in Toronto is a money laundering tool. A good lawyer can help anyone with cash use loopholes to maneuver their way through and to buy a condo despite not being a citizen or resident of the country.

This number is one of the reasons we have a housing crisis in our city. So much housing construction is dedicated to building housing units that in many cases aren’t being used by locals. Our housing supply policies are being designed to cater to wealthy investors with tons of cash who are completely disconnected from local culture, life, and history. Greed is dominating our market and it’s leaving the region with a huge supply of extremely expensive housing that few people enjoy and that is out of the reach of many. While government measures have made some progress on reducing these trends, at the end of the day there’s always a way for an investor to take advantage of loopholes. 

Another Rate Hike Is Coming

July’s inflation figures are up to 3%, the biggest monthly increase in over 7 years as prices for gasoline and and air travel increased sharply.

Interest Hike Hike Coming

Bank of Canada Could Increase Rates By Another 0.25%

Tembo has consistently reminded its readers and clients that the Bank of Canada is very mindful of inflation and watches it carefully. The Bank is internationally renowned for keeping inflation in and around its benchmark target of 2%. This sudden spike in inflation is likely to increase pressure on the Bank to raise its rate by another quarter percentage point. 
 
This recent increase in inflation comes at a time when the economy has been growing strongly and the Bank has continued its policy of increasing rates in tandem with Central Banks around the world. Canada’s mortgage banking rates are still very low by historical standards, and will remain low even as they respond to likely rate hikes by the Bank of Canada. On a separate note, real estate figures in Montreal and Toronto are improving and warming up. 

New Construction Heating Up

In addition, the latest CMHC figures show that construction starts (both condo and houses) are increasing across the country, from small municipalities to the City of Toronto. On a final general update on real estate, polling shows that the biggest political issue for Millennials is the affordability of housing, given the astronomically high average prices for real estate in the country – even after recent cooling measures.
Now Creative Group August 22, 2017 No Comments

Toronto’s Condo Market Crackles On

As Tembo previously reported in its newsletter and past blogs, the Toronto condo market is undergoing a massive upsurge in activity and dynamism. In the last 20 years, Toronto’s real estate sector has enjoyed tremendous growth in activity, prices, and supply, especially in the form of condos. The city’s previously impressive skyline is now on track to surpass many American megacities traditionally viewed as architecturally and structurally more imposing, such as Chicago’s. A huge number of the new skyscrapers and high rises built in the city are condo buildings.

New figures show astronomical price increases in many Toronto neighbourhoods, particularly in Scarborough, where some prices increased over 60% from a year ago. As the price of detached homes continues to steadily increase with demand remaining strong, many first-time buyers continue to turn to the condo market to begin their respective real estate journeys. Despite a vast slew of new factors impacting the market, condos continue to be available in strong numbers and are far more affordable than detached, semi-detached homes or townhomes.

The most dynamic price growth was seen in much of Scarborough, north-west Etobicoke, and along the downtown core and lakeshore areas of the city. While 20-40% price growth was common throughout the city, it is important to note that base prices a year ago for many condos in the city’s periphery were very low, partially explaining the explosive nature of the price increases. Prices increases were most modest in the city’s midtown area.

The supply of condos continues to increase and generally is meeting demand as approvals and new construction continues to improve market supply. Another important factor is that many millennials are now in a position to afford an entry into the real estate market, and are turning to condo purchases to start building equity. Investors, foreigners, and retired, affluent baby boomers are also buying condominium units.