Toronto Housing Squeeze: Bulk Purchases Leave Downtown Units Empty
A Montreal-based real-estate company has snapped up $30 million of unsold condo units in downtown Toronto, with a plan to buy $500 million worth over the next year.
Jesta Group, a family-owned global real-estate firm, recently bought a portfolio of condos in bulk at a recently completed building near Toronto Metropolitan University, said Anthony O’Brien, the firm’s senior managing director.
O’Brien said he’s not able to speak about the details or reveal the name of the building due to a confidentiality agreement. But the plan is to hold the units as rentals until the market turns around, which they predict will happen in three to five years.
“They’re sitting empty, there’s thousands and thousands of units sitting empty,” he said.
“We’re adding much needed inventory into the market, and we’re going to exit that inventory when we feel the market rebounds.”
It’s not the first bulk condo purchasing plan in the region.
Earlier this spring, Toronto-based investment firm High Art Capital launched a $1.3-billion fund to buy new unsold condo units, aiming to turn 2,200 units into rentals, including around 550 affordable ones.
The Ontario government is investing $300 million through the Building Ontario Fund, a board-governed Crown agency with a mandate to support building critical infrastructure in the province, to support this.
The new condo industry has stalled in recent years, as prices have dropped, interest rates have gone up, and buyers have become hard to find. Some purchasers who agreed to purchase condos before the units were built are now finding that values have dropped and they are unable to close deals.
In the first quarter of this year, for the first time in three decades, there were zero new condo projects launched in the Greater Toronto and Hamilton Area, according to a report from real-estate market research firm Urbanation.
And since the beginning of 2024, more than 11,000 condo units have been cancelled, with just over 4,000 converted to rental units. But without projects starting now, in a few years there won’t be many new units delivered.
“The preconstruction condominium market is in trouble. It needs good news stories like this to really kick-start that industry, to help the affordability crisis,” said Jeff Lever, executive vice-president at Cushman & Wakefield, who represented Jesta in the deal
O’Brien praised the HST rebate on new homes, which was recently expanded to all buyers.
“It’s what allowed us to do the transaction,” he said.
Lever said he thinks the rebate will mean more bulk-buy deals from similar groups going forward.
But there are some condo units Jesta doesn’t want to buy.
“We’re avoiding the really small studios,” said O’Brien, “as well as units that have a ‘buried bedroom,’” with a glass wall looking into the living space.
“Where it’s just basically a fishbowl inside a living room,” he said, noting these kinds of condos are just not livable for either renters or another eventual purchaser.
He said rents will start at $1,600 a month for studios, going up to $3,000 a month for larger units, with the average around $2,000 to $2,300.
They would not be under rent control as they are in a new building.
“I think we should be very skeptical of the idea that this is going to be any more stable than condo rentals,” said Jeremy Withers, a senior researcher and outreach co-ordinator for New Housing Alternatives, a Canada-wide research partnership based at the University of Toronto.
“We’re seeing this flock of deep-pocketed financial firms and ultra wealthy family funds that are currently circling the GTA market for new condos,” Withers added.
Withers believes these firms are among the investors most able to take advantage of the HST rebate, which he doesn’t believe is a good use of public resources.
He pointed to research that found, in general, that financial firms are more aggressive with evicting tenants in Toronto.
The benchmark price for a new condo in the region is still over a million dollars, according to March figures from the Building Industry and Land Development Association (BILD), which Withers said is far out of reach for most people.
Jesta Group’s O’Brien said smaller condos are often “stepping stone residential units,” and most tenants would be looking to move on after a few years.
As well, he said they might eventually be bought by an investor who wants to keep renting.
This article was first reported by The Star
