Photo: James Bombales
Research suggests that the heightened level of condo cancellations that plagued the Greater Toronto Area’s housing market in 2018 won’t be matched this year.
Industry research firm Urbanation is expecting far fewer cancellations in the GTA this year, but more than a thousand units may still end up on the chopping block by the end of 2019.
Last year, developers cancelled 17 condo projects across the GTA, resulting in the loss of 4,672 units and harrowing stories for homebuyers who were caught off guard in a year when about 17,000 new units were successfully completed.
Urbanation research provided to Livabl suggests only one project, On The Danforth, a 132-unit mid-rise building that was approved for development in Toronto’s east end, has been cancelled to date this year.
Urbanation’s director of market research, Pauline Lierman, does suspect a second site encompassing more than 1,000 units is cancelled, though she doesn’t expect other projects of that scope to follow suit.
“For this year I do not see us coming anywhere near the 4,672 units in 2018,” she says in an email. “There will probably be a couple of smaller sites which is typical for the market in any year,” she adds.
Tracking project cancellations as they occur is not an exact science, and sometimes a project that has been adjusted or delayed may end up getting marked as cancelled.
Urbanation marks a project as cancelled based on information from sources like brokers or homebuyers, or if researchers can’t get in touch with a developer and the building’s site has remained “stagnant for some time,” Lierman explains.
While the cancellation of The Step, a mid-rise that was to be built along Islington Avenue in the western Toronto suburb of Etobicoke, recently made headlines, it wasn’t a surprise to the Urbanation team. In fact, the project was included in Urbanation’s tally of fourth-quarter cancellations last year.
“We knew that they had taken back the planning application and we couldn’t reach the developer at any numbers that were available. So the recent news out there is a bit of catch up,” Lierman says.
While on the Danforth is the lone cancellation for the first quarter of 2019, by the same time last year many more units had been shelved as 1,453 units had been cancelled at the Cosmos multi-tower project and Central Park Ajax added another 410 units to the tally.
“Biggest factor in last year’s cancellations were rapidly rising construction costs vis a vis a project that sold at a price point below and missed out on the price increases that occurred since spring 2017,” Lierman explains.
“Second, there are sites with inexperienced developers who didn’t get their planning approvals in place in a timely manner (if at all) and/or could not qualify for financing (this goes back to the first factor),” she adds.
Mostly it’s a combination of these two elements that creates a recipe for a project’s demise, Lierman suggests.
Condo cancellations were a recurring topic at a recent luncheon hosted by the Building Industry and Land Development Association (BILD) in Toronto that was meant to provide info on the organization’s latest campaign.
“There are three key reasons that condo projects get cancelled,” BILD President and CEO David Wilkes said before reporters and developers at the event last month.
The three reasons, says Wilkes, are a lack of sales, an inability to get a project approved and trouble obtaining financing for construction.
“The vast majority — probably 97, 98 percent of projects do reach completion. Unfortunately cancellations have been part of what has happened in the business for the past several years,” Wilkes continued.
“It’s not a new phenomenon. It’s certainly not something that is pervasive,” he added.
According to Altus Group, 7 percent of the 532 new GTA condo launches between January 2013 and late 2017 were cancelled.
Jared Menkes, executive vice president of high-rise residential at Menkes Developments, called cancellations a “strain” on the industry, one that erodes consumer confidence.
“It’s really upsetting that something like that happens in an industry where we put all our money on the line, just like these buyers put their life savings on the line,” he said at the luncheon.
Menkes predicts that in the wake of the wave of cancellations that has swept through the industry, there is going to be a “huge flight to quality” through which homebuyers choose developments from builders with strong track records.
“I think we’re going to see that for a number of years,” Menkes added.
