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GTA developers cautious on new condo projects

February 10, 2023

At the Toronto Under Construction conference held January 25, 2023 attendees heard Greater Toronto developers may see a failure to launch new condo projects into the headwinds of higher lending and construction costs.
This, a panel was told, could lead to a shortage of new supply and put upward pressure on existing condo units.
The Bank of Canada’s eight straight increases in lending rates has thrown a wrench into plans for both developers and consumers, according to panelists Ben Myers of Bullpen Research and Consulting Inc. and Noreez Lalani of MOD Developments.
MOD is building a condo high-rise at 55 Charles St. East in Toronto that is slated to close in Q3 2024. And, as he told the Real Estate News Exchange, Lalani expressed confidence the uncertainty currently upending the market will have subsided by then.
Jeremiah Shamess, senior vice-president of real estate agency Colliers, is also bullish on the long-term condo market noting the low number of distress sales over the past year.
“We haven’t seen a massive amount of distress,” he said. “There has not been enough to call it significant.”
With rents surging in the region, some panelists suggested some condo developers may switch to building rental towers, especially given current favourable Canada Mortgage and Housing Corporation financing to encourage new developments.
But, on a per-square-foot basis, rents still substantially lag condo ownership prices, and because the economics aren’t yet sufficiently strong, there’s little chance purpose-built rental buildings will supplant condominium towers any time soon, others noted.
“From the get-go, we’ve never been able to make the numbers work on personal rental to condo for a number of factors, like rents versus price per square foot,” Lalani said.
“Thirty-five per cent equity is needed for purpose-built versus 10 to 12 per cent for a condo deal.”


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