(Bloomberg) -- Sales of new condominiums in Toronto will probably drop in 2018 from last year's record high as developers face rising construction costs and slipping investor demand, according to Urbanation Inc.
A total of 35,074 new condos were sold across the Toronto region last year, 30 percent more than in 2016, a surge driven by investor purchases and openings of projects with 500-plus units, the research firm said in a report Thursday. Asking prices for available condos rose 35 percent in the fourth quarter from a year earlier, to an average of C$876 ($712) a square foot.
Interest in condos has soared while deals for other types of homes in the Toronto area are cooling following a series of regulations enacted to tame the market's booming prices. Urbanation projects that new-condo sales will fall to a “more sustainable pace” of about 26,000 units this year.
Last year's rush of project openings put the industry under “tremendous pressure to push the units through the development cycle,” Shaun Hildebrand, a senior vice president at the firm, said in the report.
Developers will be more cautious in launching new projects as they grapple with approval delays and resource constraints that make it harder to finish existing ones, Urbanation said. Investors are likely to be less aggressive purchasers, given high prices, caps on rent growth, rising mortgage rates and harsher lending rules, the firm said.
To contact the reporter on this story: Natalie Wong in Toronto at nwong133@bloomberg.net.
To contact the editors responsible for this story: Daniel Taub at dtaub@bloomberg.net, Christine Maurus, Peter Jeffrey
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