Toronto Condominium real estate project cancellations have created concerns among realtors and pre-construction condo investors across the Greater Toronto Area. One of many projects cancelled in recent months, the Cosmos Condominiums project in Vaughan (just North East of Toronto) sent a letter this week to investors announcing its cancellation and that it would be refunding deposits.
So why are projects like this being cancelled? The Cosmos had 1,153 units planned, which the developer had previously stated were sold out. In its letter to investors, the developer cited “unsatisfactory financing terms” by lenders. On the other hand, other projects, such as The AvonDale project at 620 Avenue Road might be cancelled due to poor sales. Both reasons are related to the underling developments which are an indication of what to expect next.
It has become less profitable and riskier to own rental property in the Greater Toronto Area.
When I read “unsatisfactory financing terms”, I assume that th e developers are unable to make the type of profit that they would like to make. A number of developments over the last year have increased the cost of construction and ultimately are reducing the supply of new housing in Ontario.
These developments include:
So why is all this happening? All of these were implemented by, or as a result of, government intervention (municipal, provincial and federal). Governments have stepped up their involvement in the market because foreign speculators of Toronto area estate have pushed up pricing beyond what local residents can afford. The federal government has been concern that Canadians are over leveraged and have been borrowing against the equity in their homes, which spiked along with the speculation that has been taking place.
As a result, whereby the federal government has made it harder to borrow money for home purchases, the Ontario government has made it less appealing to own rental property.
The bottom line is that increased costs, decreasing interest from foreign speculators and increasing difficulty for local residents in obtaining mortgages is making it increasingly difficult to make a profit in the real estate development. Developers have been designing smaller and smaller condo units to keep the selling price affordable.
Since condo units can’t get much smaller and still provide a decent lifestyle, what choice do developers have?