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Tuesday, August 3, 2010

Toronto condo sales slowing

While I write this I am listening to "Eye of the Tiger" by the band Survivor... more commonly known as the song during Rocky Balboa's infamous montage videos...



Oddly enough I find it metaphorical for Toronto's slumping condominium market which seems to be gearing down as sales start to slow.

New condo sales have slumped 8% to 4,991 sales in the second quarter of 2010, compared with 5,415 in the first quarter. This is the first time since 1994 that 2nd quarter sales have slumped compared to the first.

“We were expecting sales to be stronger in the second quarter, but it looks like the market is softening,” says Ben Myers, the VP of condo market research firm Urbanation Inc. Urbanation expects new condo sales to continue to slump for the rest of 2010.

Compared to 2009 sales are down dramatically. (Although it should be noted 2009 was a record year for the 1st and 4th quarters with respect to condo sales.)

However there is another problem... the market is becoming flooded with condos. Another 12,000 condo completions are expected by the end of 2010. There will be roughly an extra 2,000 condos that will go unsold.

“That’s an absolutely huge number and a lot of product coming on to the market all at once,” says Myers.

Furthermore the condos that are being purchased are mostly by investors and speculators who are hoping to flip them for a profit once the condo is finished, which means the market of new condos will be even more flooded.

Toronto has 272 condo projects currently active, all looking for buyers in Toronto's real estate market. Except these buyers are being cautious and looking for deals. Another 20 new condo projects are expected during the 3rd quarter, which will flood the market even more.

The problem however is that with so many condo projects and not enough buyers many projects end up with delayed completions because the money isn't flowing in fast enough.

Anybody investing in a new condo now should expect deflation of the value, not flipping it for more. The average price for a new condo in Toronto is $529 per square foot. A few years ago it was $639 per square foot, which shows prices are coming down dramatically.

In contrast its much cheaper to buy an older condo in Toronto. A mere $369 per square foot. The resale market is very strong right now, with the 2nd quarter of 2010 posting record sales of 5,076.

My advice for people buying condos? Keep your chin up and keep trying to find a deal. With the market slumping now is a good time to buy a condo for less. Keep looking until you find a deal which is perfect.

"Let me tell you something you already know. The world ain't all sunshine and rainbows. It is a very mean and nasty place and it will beat you to your knees and keep you there permanently if you let it. You, me, or nobody is gonna hit as hard as life. But it ain't how hard you hit; it's about how hard you can get hit, and keep moving forward. How much you can take, and keep moving forward. That's how winning is done. Now, if you know what you're worth, then go out and get what you're worth. But you gotta be willing to take the hit, and not pointing fingers saying you ain't where you are because of him, or her, or anybody. Cowards do that and that ain't you. You're better than that!" - Rocky Balboa.

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