The Toronto area's new condominium market rebounded in the second quarter of 2009 as consumer confidence improved and developers offered incentives to move their units.
But analysts say the market isn't on firm ground yet. Thousands of units are still under completion and there is a backlog of unsold units.
After three consecutive quarters of negative growth, sales of condos hit 2,963 units in the second quarter, up 223 per cent from the dismal 917 first-quarter sales, according to market research firm Urbanation inc. in a report yesterday.
"This is certainly better than most people had expected," said Ben Myers, executive vice-president of Urbanation.
He said figures for July are also expected to be positive, noting "sales seemed to be going well."
The resale condo market, meanwhile, is forecast to be up 30 per cent in July from the same time last year, according to some estimates.
Myers said low interest rates and first-time buyers flocking to condos have helped drive the numbers. Developers were also quick to react to the recession by changing floor plans to offer smaller units and giving fewer amenities at a lower price point. "I think developers are a little more optimistic after the second quarter," said Myers.
"It appears the recessionary conditions in the condo market came to an abrupt end in the second quarter."
While the market shows a potential bottoming out in the first quarter, no one is claiming victory yet.
Second-quarter sales are still down 40 per cent from the same quarter in 2008. That quarter saw 4,962 sales, just before the market started to correct rapidly as the recession hit.
Analysts have also repeatedly warned there are 35,618 condominium units under construction in the Toronto area, which could create a glut when most are completed this year and next.
"There is some concern, because that amounts to a three year supply," said Myers.
An average of 10,000 to 13,000 new condos are registered annually.
However, strong sales in the existing home market for condos means much of that supply is being whittled down.
"The uncertainty in the new construction market may have driven buyers to the more predictable resale market," said Myers.
Urbanation reported 4,893 sales of resale condos in the second quarter, a new record high. One big reason is that resale condos are cheaper than new condos.
The average price for a new condo in the second quarter was $474,000, compared to $326,000 in the resale market.
Meanwhile, fewer developers are starting fewer projects. Only two new towers went to market in the second quarter. As well, some projects have stalled, with three being pulled off the market as sales fizzled. Other projects such as 1 Bloor E., which was supposed to be the tallest residential tower in the city, are in limbo. The site is for sale after developers defaulted on loans.
"After the global meltdown, banks are leery of lending money to any large scale projects," said Myers.
Analysts are hopeful that with fewer new projects and low interest rates, new condo sales will stabilize.
"The fall market will be key to see how the year shapes up," said Myers.
Meanwhile, south of the border, the U.S. real estate market seems to be gaining further traction.
U.S. pending home sales rose by 3.6 per cent month over month in June, the fifth consecutive rise.