Local Condos 101: Supply & Demand
One question we get asked all the time is how much growth is too much growth? It’s natural to see the cranes in the air and all of the new condos going up across our city and wonder if we are ever at risk of building too much or on the flip side, if enough being built to satisfy future demand? While it’s impossible to predict with 100% accuracy how close demand will match supply in any industry (the million dollar question for economists everywhere), our obsession with condos and our love for data puts us in one of the best positions possible to be able to advise and help answer this question as it relates to the local condo market.
As many of you already know, we track and analyze every single new condo development announced, in the planning stages and those about to hit market. We do this to ensure not only are all of our clients in the loop and have an opportunity to purchase the best units in these developments but also as a way of measuring how much supply is scheduled to hit the market relative to demand so we always know where the market is headed and can advise accordingly. When it comes to supply, the single most important factor we’ve learned over the years is not necessarily how many new condos are being built but when they will be completed. It’s easy to see a number of new projects under construction and assume that this means hundreds of new condos will soon be hitting the market and to some extent, that’s true. But the amount of time it takes to build a new condo building (typical local high-rise condos usually take about 2 years), and the fact that construction usually begins at different times and units within them are often completed gradually floor-by-floor means means even if a number of condos are under construction concurrently, units in those buildings are usually completed and handed over to residents at very different times. So why is this important? Take the current market for example. In the core areas we currently only have 3 main projects under construction: the Caroline St. Private Residences, the Midtown Lofts and One Hundred Condominiums together consisting of over 600 new condominiums. Sounds like a lot right? However, now consider that the completion of these units will span gradually between the end of this year through 2019 and this creates a very different picture with supply being delivered a lot more gradually to the market than it may appear at first blush. Considering the size of our local population, its prospects for growth, increasing employment in and around where many of the newer condos are being built, the increasing cost of single detached housing in our core areas and the many lifestyle and demographic factors driving more and more residents towards condo life in the Uptown and Downtown areas, the number of new condo units being added to the market remains conservative and among the strong fundamentals of our local market, we expect demand to continue to grow alongside supply, a trend that is definitely supported by our observations within the current market.
Have a great weekend everyone!
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