Thursday, October 16, 2008

Financial Insecurity may slow Toronto Condo Construction

Some condominium developers in Toronto are starting to feel the effects of the global credit crunch, and analysts say that could put some projects in jeopardy.

A condo market analyst says 30 per cent of the 120 projects currently being marketed in Toronto are teetering because they can't get financing.

Projects already being built don't appear to be in any danger of grinding to a halt, said Jane Renwick, executive vice president of Urbanation, a condo consulting firm.

But Renwick is concerned about smaller projects that haven't reached the construction phase.
The "A" locations — the ones downtown, or near subway lines and being built by proven developers — aren't affected. It's the "B" locations being presold by unproven developers that are causing concern.

"The Tridels, the Menkes of the world, they will have no problem. They've got good, established relationships with the banking community. It's the marginal players, the new kids on the block, those are the ones that we're worried about and that could represent up to 30 per cent of the projects that are not under construction," said Renwick.

Mike Labbé, who runs Options for Homes, a non-profit company that develops condos and townhouses for people on low incomes, has heard from other developers that it's taking longer than ever to line up financing.

"It's getting tighter. It's getting harder to find. People are having to be more creative. They're having to come up with more of their own equity to make it happen," says Labbé.
To raise equity, Labbé says, some developers are even selling off land they were holding for future projects.

For construction workers like electrician Tony Pacheco, it's a worrying scenario.
"It's scary," said Pacheco, "but at this site here, we have lots of work."

Renwick says that if the situation continues, "we're going to have disappointed buyers.
"They are going to get their money back, they will get their deposit plus one per cent according to their purchase agreement. They'll be protected, but disappointed."

David Pylyp; While I do agree that the new projects may be difficult to sell in a changing economic environment, A) the Buyers have many choices to pick from, B)Their deposits are protected, C) if the project does not achieve critical mass their deposits are refunded or they may choose to re-invest in the new revised projects. A simple example of this was the High Park Lofts in Roncesvalles Village that was sold 3 times, thru 3 different developers until it achieved critical mass and was finally constructed. (site drawings, ceiling heights and floorplans were redrawn and revised)

There will be many more that are sold and resold prior to construction. It cannot be stressed enough, the cranes that you see going up on different sites around the west end of Toronto and along Humber Bay Shores, are building that have sold at least 75 to 80% of the proposed units, and THEN commenced construction.

No comments: