Condo starts plunging in Toronto and Vancouver
September 14, 2022
Despite posting the highest new home prices in the country, both the Greater Toronto Area (GTA) and Metro Vancouver are seeing a plunge in housing starts prompted by a stoppage of new condo projects.
In Metro Vancouver, at least six major developments have stalled or stopped altogether.
Starts of new condo apartments fell 41 per cent in the first seven months of 2022 compared to the same period in 2021, according to Canada Mortgage and Housing Corporation.
A key barrier is rising new condo prices due to high land costs, higher construction costs and government fees. In Vancouver, for example, a typical new condo price includes $160,000 to $180,000 in municipal fess.
Of the eight Metro Vancouver condo projects that did launch in July 2022, pre-sales reached an average of just 21 per cent according to MLA Canada (which monitors the new home market in Canada). These sales compare with pre-sales of up to 30 per cent of new condo units earlier in 2022 and up to complete sell outs that were common during 2020 and 2021.
“Just trying to make the proforma work based on current revenues, current costs – I can’t make any of it work,” said Hani Lammam, vice-president, development and acquisitions with Cressey Development Corp. “You add another rate hike and it just puts the brakes on it. There’s not much we can do.”
In the GTA, at least 10,000 new condo units had been put on hold as of July 2022 and others may follow after the fourth consecutive Bank of Canada rate hike on September 7.
With the prime rate now at 3.75 per cent, mandatory mortgage stress test for buyers was pushed to 7 per cent or higher at many lenders.
According to Urbanation, at the beginning of 2022 about 35,000 new condo units were anticipated to launch for presales in the GTA. In the first half of 2022 close to 16,000 units launched. With less than 10,000 units expected during the rest of 2022, at least 10,000 units will be put on the shelf.
GTA new condo sales were down in the second quarter (Q2) 2022—declining 19 per cent from Q1 and 24 per cent year-over-year. That said, the 6,792 units sold in Q2 is still above the 10-year average of 6,302 sales.
GTA condo prices dipped 4.9 per cent from a high of $988 per square foot in Q1 to $940 in Q2.
As of Q2 2022, there was a record 123,654 new condos either in pre-construction sales or under construction in the GTA—mostly outside of the City of Toronto.