Price of New Condos Holding Strong Despite Plummeting Sales
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The final sales figures for new condos from Realnet are in for the December and the year 2008. In short, prices are still going up, while sales have dropped off significantly. [Note: these numbers are for new condos. For resale condos, see my previous posts for more stats on the downtown condo market.]In 2007, over 23,210 new condos were sold in Toronto (GTA). A record year-by a long shot. In 2008, 15,239 units were sold, representing a 34% decrease in the number of sales.
Taking a look at just the month of December, sales are down an astounding 81% year over year. In December 2007, 1024 units were sold versus 198 in December 2008 (GTA).
Yet despite the number of sales falling off a cliff, prices for the month of December year-over-year are actually up over 10% for high-rise condos. This is pretty much the exact opposite of what we have seen in the resale market where average selling prices are down about 10-11% for downtown condos.ÂÂÂ
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How can this be? Unsold inventory is climbing in the new condo market just as it is in the resale market. Shouldn’t the weight of all this inventory put downward pressure on prices? The answer of course is yes, but most developers are not yet facing dire circumstances where there is any need to reduce prices.
Developers have one tool in their arsenal that individual consumers in the resale market do not: they can reduce supply at any time, thereby easing the downward pressure on prices. Very few new developments will be introduced to the Toronto market in 2009. Most that were planned have been placed on the back burner. Developers will be focusing on selling the units they currently have in the pipeline, getting financing to build, and completing construction as quickly as possible.
That being said, whereas 6 months ago there was absolutely no negotiating the list prices of new condos, my personal experience of late suggests discounts of $5,000-$10,000 off of 1 bedroom or 1 bedroom + den units or $15,000-$20,000 off of 2 bedroom units can be fairly easily negotiated at most new developments.
Below are two more interesting charts, one showing total figures for new home sales in the GTA and the other shows the monthly new home sales for the past few years broken up by high-rise (condo) and low-rise (homes).
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What are your thoughts? I always appreciate your feedback. Leave me a comment below or send me an email via my contact page.
All stats  from Realnet. Full report download: Realnet New Homes Market Report December 2008 **REPORT REMOVED DUE TO COPYRIGHT CLAIM BY REALNET CANADA INC.**
