Were property stats misleading?

Taking a closer look at condo data from the Toronto market could have saved some hand-wringing by such institutions as the Bank of Canada and the CMHC, says one economist, who points out they were fooled into thinking there was a glut of product.

According to a new report from CIBC, it was just four Toronto condominium developers and questionable statistical reporting that led to news earlier this year about a glut of high-rise units in Canada’s largest market.

The bank’s deputy chief economist Benjamin Tal says many in the industry were deceived by the raw numbers about unabsorbed or unsold units, which increased, suggesting, he says, “that developers are finding it increasingly hard to sell completed units — usually a first sign of troubles ahead.”

According to Tal, the CMHC found that between December 2014 and May of this year, the number of unabsorbed units rose in Toronto from less than 1,000 to close to 3,000 — a level that is even higher than those seen in the early 1990s.

So what happened? About half of the completed and unabsorbed units are in city of Toronto, but more importantly one third of all unabsorbed units, were constructed by four developers. And five projects coming on at once accounts for about one quarter of the unabsorbed units on the market today.

“To be sure, the GTA’s condo market will be tested as interest rates start rising in the coming years, and increased resale activity from domestic condo investors will result in excess supply and some downward pressure on prices,” said Tal. “But for now, those who look at the rise in unabsorbed units as a sign of increased vulnerability are barking up the wrong tree.”

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