The Greater Toronto Area is facing an oversupply of condominiums due to high borrowing costs and a record number of completions, according to recent reports.
The latest data from the Canada Mortgage and Housing Corporation (CMHC) shows that there were 21,000 newly completed condo units in the Greater Toronto Area in the first quarter of 2021. This is a significant increase from the same period last year, which saw 14,000 completions.
At the same time, the average borrowing cost for a new condo in the Greater Toronto Area has risen to 3.25%, up from 2.75% in 2020. This increase in borrowing costs is making it more difficult for potential buyers to enter the market, leading to a surplus of unsold units.
According to CMHC senior analyst Dana Senagama, the combination of high borrowing costs and record completions is creating an oversupply of condos in the Greater Toronto Area. This oversupply is expected to continue in the coming months, as there are currently 75,000 units under construction in the region.
The oversupply of condos is also having an impact on prices. The average price for a new condo in the Greater Toronto Area has dropped by 2.7% in the first quarter of 2021, compared to the same period last year. This is the first time in six years that the average price for a new condo has decreased.
Experts are warning that this oversupply of condos could have a ripple effect on the housing market in the Greater Toronto Area. As more units become available, it could lead to a decrease in demand for other types of housing, such as single-family homes.
However, some are optimistic that the oversupply will eventually balance out as the demand for housing in the Greater Toronto Area continues to grow. The CMHC predicts that the region’s population will increase by 2.3% in 2021, which could help absorb some of the excess supply.
In the meantime, developers are adjusting their strategies to adapt to the current market conditions. Some are offering incentives, such as free parking or discounted prices, to attract buyers. Others are shifting their focus to rental units instead of condos.
Overall, the oversupply of condos in the Greater Toronto Area is a result of a combination of factors, including high borrowing costs and a record number of completions. While this may have a short-term impact on the housing market, experts believe that the region’s growing population will eventually help balance out the supply and demand.
