Why is it Hard to Find a 3-Bedroom Condo in Downtown Toronto?

10 October 2012

The problem in finding a three bedroom condo for owners starts at the pre-construction development stage. The lead time in Toronto, from pre-construction sales, through actually building the condo project, to Occupancy, and finally Registration with a mortgage is four years! Unfortunately, owners do not want to wait that long. Their fear is that what they want to live in now will be radically different than what they want four years from now! So who buys the pre-construction sales? Of course it is investors. Investors do the math. Historically, smaller units have performed better than larger units in price appreciation. But more importantly, smaller units are easier to rent and the rental returns are better. Hence they opt for smaller units. To prove my point, the Water Club Condos on Queens Quay consist of three towers. The first two designs were all smaller units. The third tower was supposed to be all larger units. The developer could not sell them at the pre-construction stage and hence he had to go back to the drawing board to make them smaller. Remember developers cannot build until they reach at least 70% pre-construction sales and in many projects, the percentage asked is even higher! No sales – no build! So with that background, what do you do if you are still determined to find a three bedroom condo? You have two choices. If you have a lot of money, you can buy a Penthouse. Builders always keep a number of these units off the market until the Occupancy stage. Your other choice is to focus on older condo buildings. Those built before the 1989/90 market correction when construction financing did not require all these pre-construction sales. Sorry to say, current condo inventory is very tight for those baby boomers who think they can sell their house and downsize to a condo of 1800 sq.ft.