The Bank of Canada and the media have consistently pointed out that there is overbuilding in the Toronto Condominium Market. I wanted to put some statistics and forecasts out there to test that hypothesis.
According to the Statistics Canada, the Population in the Toronto CMA increased by 94,000 persons per year between 2006 and 2011, the previous three Census periods were 86,000, 84,000 and 73,000 people per year. The number of private dwellings in the CMA has increased by 37,000 units per year between 2006 and 2011. By comparison 45,000 units per year, and 35,000 units were added on average per year in the previous two Census periods.
This 2011 population in the CMA increased 9.2% over 2006 according to the Census, with 9.2%, 9.8% and 9.4% increases in the previous three Census periods.
Based on those figures, the average household size has decreased from 2.85, to 2.80, to 2.70, to 2.68 or about 2% on average per Census period (ignoring vacancies and second homes).
So let’s make some conservative assumptions, the 2016 population will be 9% greater in 2016 than in 2011 (below each of the increases listed above), an increase of 100,500 people annually. Let’s assume that the household size decreases only slightly by 0.6% (the last period was 0.5%, therefore we went with a lower estimate than the 2% average listed in the above paragraph). So with the 2.67 average household size, the 100,500 population per year would require 40,000 new households per year.
Based on Data from CMHC, there were 33,800 housing completions in the Toronto CMA in 2011, and based off their October 2012 figures, there will be approximately 31,500 by year-end in 2012. That’s significantly lower than 40,000.
A further breakdown shows that 53% of completions in 2011 were condominium apartments and approximately 40% in 2012. However, based on sales in market over the past couple of years, the share of high-rise condominium will increase to above 60% of total completions.
In 2013, there is the possibility of over 25,000-28,000 condominium apartments completing, however, it is more likely that the absolute maximum would be 20,000 to 22,000 unit occupancies (keeping in mind the most condominium completions the CMA has ever delivered in one year was 16,000 in 2010). Based on data from CMHC under construction info, up to 17,000 ‘other’ housing completions could occur in 2013 (single-detached, semi-detached, row & rental apartment). Guess what, that’s still below 40,000!
If the construction industry in Toronto is some how able to deliver 25,000 condominium units in a single year (which many experts in the industry do not believe is possible in the next five years), that’s 63% of 40,000, so yes there is a remote possibility that more than 40,000 units could be completed in one year, but that is expected given that other years will be under 40,000 and our 2011 to 2016 estimates are based on the AVERAGE annual growth in total units.
The way that these articles and reports are written seen to indicate that the overbuilding is a foregone conclusion, that we will be WAY over on what is needed, and from the data we presented, that certainly doesn’t seem to be the case.