Builders In Toronto Wait For Sale ‘Green Light’ To Begin Condo Constructions
It has been a busy year so far for real estate agencies and construction companies alike, rising housing demand has given suppliers their fair share to worry about as they have come up with a new strategy to effectively address demand concerns.
Demand has reached such high rates that units are being sold only moments after listing and at times even before construction has begun. Pre-sales are becoming a lot more common and are now being used as leverage for construction companies to begin condominium construction in the Greater Toronto Area.
According to a report by the Canada Mortgage and Housing Corporation (CMHC), 79% of condo constructions made in the city only begin construction after 70% of units have already been sold. The report goes further to indicate that 94% of completed condos and those still under construction were sold at the end of last year.
This new strategy appears to grant a lot more legitimacy to construction projects as condos are now being built without the risk of not being bought after completion.
In addition to eliminating such risk, the city can avoid a contrasting scenario in the 1980s when it did fall victim to overbuilding.
CMHC stated in the report that: “In general, our research shows that the majority of builders wait until a higher sales threshold is reached prior to commencing construction, thus mitigating risks associated with speculative building. A tight resale condo market and strong rental demand have helped to absorb some of the completed and unsold units. The current inventory level is low compared to the highs witnessed during the early 1990s and has eased from a slight increase in 2015.”