Assignment sales currently account for nearly one in four pre-construction sales in Toronto, industry players say
With declining rents and much stricter lending qualifications for rental property, real estate investors in Toronto are scrambling to withdraw from closing on their newly built condos in the region.
Simeon Papailias, senior partner with REC Canada, told The Globe and Mail that assignment sales currently represent around 20%-25% of his firm’s pre-construction sales. Papailias said that this was far higher than the 10%-15% level seen before the COVID-19 pandemic took hold.
Industry research firm Urbanation said that condo vacancy in the Greater Toronto Area went up to 2.4% in the third quarter. During the same period, the region’s average rental price was 9% lower on an annual basis.
“Guys who are closing in the short term are absolutely shook and affected by the pandemic and what it has done to the rental market. That is what is pushing them to assign,” Papailias said.
Urbanation data also showed that approximately 23,000 new condo units will be completed in Toronto by the end of 2020, with another 22,434 expected to follow next year. Urbanation said that roughly half of these were purchased as rental units.
This is compounded by the fact that over the past few quarters, banks have imposed significantly tighter guidelines for rental financing, including larger down payments.
“The financing has gotten a lot more difficult,” said Matt Elkind, senior broker with Connect Realty. “The banks’ appetite to lend to investors is down significantly. An individual, six months ago, would have qualified without problem. They’re not now.”