Toronto developers pulling out of pre-sold condo projects

Rising construction costs, climbing housing prices are making projects riskier

New York Weekend Edition /
Apr.April 21, 2018 10:00 AM

Toronto

Toronto’s condominium developers are pulling the plug on projects with significant numbers of pre-sales as construction costs climb and home values continue to rise.

Developers in Canada’s largest city are typically required to pre-sell 70 percent of a project’s units in order to financing. But construction costs have risen since many developments were penciled out. And condo prices have climbed too, meaning developers in many cases are leaving money on the table with contracts inked when values were lower, Bloomberg News reported.

“Many projects launched for pre-sales prior to having their proper approvals in place,” said Shaun Hildebrand, a senior vice president at Urbanation Inc. “By rushing to bring units into a hot market, some projects jumped the gun and added risk to the development.”

There are 10,622 condo units in the greater Toronto area in projects that are waiting to being construction that were offered for pre-sale before 2017, according to Urbanation’s figures. But since the start of last year, 17 projects in the region with 3,627 units have been cancelled, according to the real estate research firm Altus Group. Those figures were up from 808 units across seven projects in 2016.

The cancellations could be a boon for other developers, who will see demand spill over into under-construction projects. But it will be costly for buyers, who will see equity erode because the price of a new condo is higher than when they signed contracts.

And experts say that given demand that remains strong, it’s likely many cancelled projects will be revived.

“We haven’t seen an increase in supply yet,” said Mike Czestochowski, executive vice president of the Land Services Group at CBRE. “It would be hard to imagine what else they do with the site.” [Bloomberg] – Rich Bockmann

 

Related Articles

arrow_forward_ios
Jason Rabin and 70 Cobb Road, Water Mill, NY (Google Maps, LinkedIn)
Southampton compound sells for $118.5M
Southampton compound sells for $118.5M
John Gilbert (Getty Images, iStock/Photo Illustration by Steven Dilakian for The Real Deal)
Rudin COO and tech chief John Gilbert to step down
Rudin COO and tech chief John Gilbert to step down
The cryptonaires will see you now
The cryptonaires will see you now
The cryptonaires will see you now
TENNY Policy Director Martha Star and New York City Comptroller Brad Lander (NYU Wagner, New York City Comptroller)
Last Stand: Property tax reformers recruit Lander to lawsuit
Last Stand: Property tax reformers recruit Lander to lawsuit
Zillow senior economist Jeff Tucker (Zillow, iStock)
US housing market up a historic $6.9T in 2021: Zillow
US housing market up a historic $6.9T in 2021: Zillow
Tyler Whitman, licensed real estate salesperson, The Whitman Team @ Triplemint; and 43 Garden Street (Corcoran, Triplemint, iStock)
“Million Dollar Listing” star buys instead of selling
“Million Dollar Listing” star buys instead of selling
Gary Beasley, chief executive officer and co-founder, Roofstock (Roofstock, iStock)
Roofstock ramps up iBuying, even with tenants in place
Roofstock ramps up iBuying, even with tenants in place
Sam Zell with a RVC Outdoor Destinations site (Getty, RVC)
Sam Zell’s Equity Lifestyle Properties invests $147M in manufactured homes
Sam Zell’s Equity Lifestyle Properties invests $147M in manufactured homes
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...