I find these eye catching headlines terribly misleading to the public although I understand the media’s need to grab your attention. I saw this headline picked up by Bnn.ca, Huff Po, GlobalNews and many others. Well they got a lot of attention, but unless you really understand what number they’re referring to, it can be easily misunderstood.

One might easily interpret this headline to mean that there’s an unusual number of unsold condos on the market now. If you’re looking to buy a condo, most people’s immediate reaction to this news is to put the brakes on their search because they infer prices will be falling and that if they wait, they’ll get a better deal. That can be damaging for Buyers because the premise is untrue. There is not a 21 Year High Inventory of Unsold Condos.

To be crystal clear for February, in the largest condo district (C01), there were 1048 Condos for Sale and 264 sold for a ratio of 0.25. We’ve been around that ratio for just over 2.5 years. Looking at the whole GTA, there were 3744 Condos for Sale and 1153 sold for a ratio of 0.30 which is even better.

Both of these key graphs show us it's business as usual for the past 2.5 years. So what are they referring to this “21 Year High”?

The specific number that the BMO economist was referring to with the “21 Year High” was that if you only consider the New Construction projects which have completed, how many units are still unsold by the developer. So this is a very specific subset of a subset of condo inventory they’re measuring and I have trouble seeing any impact of this at all in the condo market today. This measurement was for January, more than a month ago, and I see no impact of this in the condo market today, inventory or prices.

What the real take away from that BMO slide was that there was a lot of New Construction condos that completed in January, a total of 10,368 units. That is a lot. Every year, there are about 17,000 – 18,000 new construction condos that are completed so that is an abnormally high and unsustainable number for 1 month. I would estimate that about 90% of these are pre-sold and many owners have been waiting for years to take ownership.

To clarify all of this as simply as possible, there was a big spike of New Construction Condos completed in January, so of course there’s also a spike in finished units still available for sale from developers. So what impact could this have going forward?

For tax reasons, most investors and owners of new condos know that they need to live in or rent out their suite for at least one year after taking ownership to qualify for any relevant HST rebate and qualify the profit as Capital Gains vs Taxable Income. That’s a novel in itself, but the takeaway is that we should expect a spike in the condo rental inventory in the coming months. I believe that’s the real story that’s been missed but I don’t expect the impact to be too significant and will take time. Landlords will put up their condos for lease, take longer to rent, have to lower their rents a little until the student market returns in August and completely wipes out any inventory under $1800 per month.

Looking further down the road to spring 2016, some of these investors will want to keep renting their units instead of selling them. Most of them paid so much for their suites that they likely won’t break even after expenses which will motivate them to hold them longer. Still, it wouldn’t be surprising to see a spike in condo inventory in Spring 2016 but a lot can happen between now and then. My grandfather always warned me about trying to time any market, so far he’s been right.