The projects will be far more than just glass-and-steel towers. They will be giant thermometers providing a quick reading of how much heat is left in a condo market that’s cooled considerably since last year’s feverish pace of sales.
Tridel will launch sales Saturday of its much-anticipated Ten York project. Originally slated to be 75 storeys, and the highest building on Toronto’s waterfront, it’s now down to 65 storeys and 695 suites because of issues with the small site and protests the project was too tall for such a prime location.
It will be overtaken in two weeks when Empire Communities launches Eau du Soleil on the Etobicoke waterfront with two towers, 66 and 44 storeys, and a staggering 1,250 suites.
In the next few days, the 44- and 48-storey King Blue project will also launch sales of some 800 units planned for King and Peter Sts. in the downtown entertainment district.
The flurry of big condo launches is highly unusual for this late in the year, but reflects the fact that developers have been holding their breath, and holding off on launches, trying to get a better sense of where the new condo market is headed after last year’s record 28,000 sales.
The fact that condo sales have been dropping dramatically and inventory rising has prompted housing analyst Ben Rabidoux to describe Toronto’s condo market as “a fly in search of a windshield.”
Developers, however, remain cautiously optimistic.
“We’ve spent a tremendous amount of time reviewing this project, looking at the numbers and making sure we have it right,” says Tridel vice president Jim Ritchie.
“There is obviously a segment of the marketplace that thinks this is not a good time to buy, but we believe we’ve found enough (buyers) who have a longer-term vision. Even if there are ups and downs in the market in the short term, these units won’t be up for five years. This is building for the future.”
Empire toyed with delaying its sales launch until the busier spring season, said executive vice-president Paul Golini, but decided it might actually have a market advantage going head to head against just two other projects.
“We’re not going to get confused with a myriad of developments and we’re all distinct and in very different areas of the city.”
Tridel believes its key advantage with Ten York is location — just steps from the burgeoning railway lands and downtown core — and has already had 5,000 buyers express interest.
While investor interest has definitely cooled, it remains strong, Ritchie and Golini believe. And these projects will definitely test that belief.
The numbers from condo research firm Urbanation paint a sobering picture of the condo market now compared to last year’s record year for sales and launches.
As of the third quarter of 2011, there were 68 condo projects with 19,028 units announced across the GTA. This year launches are down about 20 per cent, to 68 projects and 15,221 units, Urbanation reports.
While a record 28,190 new condos sold in 2011, shattering all previous records, they’re expected to come in closer to 17,000 this year, better reflecting long-term trends insists Ritchie.
Rabidoux is highly critical of the “eye-popping pace” of new condo launches with tens of thousands of condos already under construction and the economics making less and less sense for investors.
With new condos now averaging $600 to $700 per square foot in the downtown core — Tridel’s one bedrooms will be about $626 per square foot — it’s becoming increasingly difficult for investors to cover their costs with rents, says Rabidoux.
But Ritchie remains realistic. None of these new projects will go ahead unless some 70 per cent of the units are pre-sold, and that’s unlikely to happen, as it did routinely last year, in just a few weeks.
In fact, Tridel has given Ten York 18 months — six months longer than historic sales norms.
“What happened in 2011 was once in a lifetime. We’re just returning to a normal market, and that’s good.”