More mid to high end rental buildings will soften demand for investor condos in 2015 and beyond.
Since Context built their rental building at Bay and Dundas we haven’t seen many more mid to high end rental buildings come up in Downtown Toronto. Greenwin and a handful of other landlords have popped up a few here and there but up until now it’s been the new condo market that’s fulfilled the demand for mid to high end downtown rentals.
A recent article by the Toronto star reported that only 2.4% of Toronto’s condos are investor owned and rented. It’s hard to dispute hard evidence when I don’t have any real proof other than anecdotal evidence that this number is likely much higher. How much? While working as a Sales Representative for Brad J. Lamb Realty I was involved in hundreds of pre-construction condo sales…many more than I’d like to admit considering how I feel about them as an investment now! In some sales centres we’d sell upwards of 40% to investors. Buyers who have no intention of living there. Some keep them vacant and others rent them out but I just can’t believe that 97.6% of all Toronto condos are end user owned. It’s just not possible.
EDIT Dec 18th I misinterpreted the data. The figures are in line for FOREIGN investors. I misread as simply ‘Investor owned’. Sorry!
Developers have finally caught on to the insane demand for mid to high end condo rentals and are rethinking their real estate investment strategy. In fact, some deep pocketed Funds are so convinced that building rental is the way to go that they’re pouring hundreds of millions into existing condo developments and buying up the whole thing. Recently, in an unprecedented move, a Private Equity Fund completely bought out the Selby Condos in downtown Toronto. Why would they do that after The Selby hosted the most successful selling event ever held in Toronto? Who the hell knows. All I know is that there are a lot of pissed off condo buyers and Realtors out there right now and one very happy Private Equity Fund who’s going to have a ton of high quality rentals to put on the market in 3-4yrs.
We’ll see this trend continue in the coming years and we’ll also see the demand for pre construction condos by investors decrease since the big boys are going ALL-IN on rental building. If you’re an investor, it’s best to stick to Freehold at this point. Single unit condo’s as investments don’t all make sense. Some do though.