{"id":3036,"date":"2023-05-30T14:44:26","date_gmt":"2023-05-30T18:44:26","guid":{"rendered":"https:\/\/canadianlending.ca\/brokers\/?p=3036"},"modified":"2023-05-30T14:44:26","modified_gmt":"2023-05-30T18:44:26","slug":"gta-condo-market-investors-needed","status":"publish","type":"post","link":"https:\/\/staging.canadianlending.ca\/brokers\/gta-condo-market-investors-needed\/","title":{"rendered":"GTA Condo Market \u2013 Investors Needed"},"content":{"rendered":"

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A recent <\/span>report<\/span><\/a> from CIBC and Urbanation paints a challenging future for new condo investors and the prospects for condo construction in the GTA.<\/span><\/p>\n

According to their analysis, nearly three-quarters (72%) of condo rental investors tend to buy new units as opposed to resale, with an average gap of five years between the purchase and completion of the unit. New condos reaching completion have appreciated in value; however, the key issue is the cash flow performance of these units.\u00a0<\/span><\/p>\n

According to the report, only\u00a0 25% of these units did not have a mortgage. Of the levered units, just over half (51%) were not cash flow positive \u2013 rents were less than the combined cost of mortgage payments, condo fees and property taxes. This compares to 44% in 2021 and 40% in 2020. For resale units, the economics are even less appealing. In 2022, only 18% of condos bought in the resale market and subsequently rented were cash flow positive.<\/span><\/p>\n

Negative cash flow has been a challenge for the Toronto condo rental market for some time. The capital appreciation of these units has been the payoff that has kept investors in this market. However, continuing to rely on potential capital gains makes this a less compelling investment.<\/span><\/p>\n

If investors are less willing to participate in the market, this could slow housing development in the GTA. While completions are currently at a record high, a sharp drop in presales will eventually slow them down. Developers rely on the presale market to arrange bank financing for projects. If presales fall, projects will get pushed out into the future.\u00a0 With immigration driving population growth, this could lead to greater supply\/demand imbalances.<\/span><\/p>\n

Condos represent the majority of new home development and new rental supply. What outcomes are possible?:<\/span><\/p>\n