Condo development in Hamilton stalls as market hits historic low

Hamilton Spectator

2 days ago

Builders of highrise condos are hitting the brakes on Hamilton projects as the
residential development sector
struggles through the worst market downturn in decades.
After another dismal quarter, the horizon for condo towers — the kind of density Hamilton is banking on to breathe more life into
downtown
, meet growth targets and provide more housing — is hazier than ever.
One builder that's taking a wait-and-see approach is Coletara Development, which has paused sales on a 23-storey condo tower planned for vacant land on the edge of downtown
Coletara Development has paused sales on a 23-storey condo tower planned for vacant land on the edge of downtown.
'The project's all completed. We're ready to go from a planning perspective,' Paul Kemper, president of the Mississauga-based firm, told The Spectator.
'That's not our issue. Our issue is that the market has slowed down.'
Just under half of the Apex Condos, which is planned for the southwest corner of King and Queen streets, have sold, Kemper said.
'We're just waiting for the market to come back and then we'll be moving forward with additional sales.'
Typically, although the threshold can vary, high-density
condo developers
must reach at least 60 per cent in presales to line up financing from lenders before projects can advance.
The residential market across the Greater Toronto and Hamilton Area (GTHA) — and especially within the high-density condo sector — has crashed under the weight of a combination of factors, including spiked interest rates, escalating construction costs and higher unit prices.
Kemper points out interest rates have come down, but consumer confidence hasn't yet rebounded during a wounded economy (most recently battered by U.S. tariffs).
Our issue is that the market has slowed down.
'The reality is that because the economy is going poorly, there is just not the disposable income that people have to buy homes, and the homes are at all-time-high prices, so it's hard for the consumer. We recognize that.'
The 'only variable that we can control' to tame prices is decreasing the size of units, but 'they have to be livable at the end of the day,' Kemper said.
Coletara is no stranger to Hamilton, having built a 24-storey residential building at the former All Saints Anglican Church site at King and Queen, just north of the Apex property, a few years ago.
And as his firm watches the market to resume sales, it has three other high-density projects in the queue for downtown that it wants to move on, Kemper said.
'We haven't moved them into sales yet because we're waiting for Apex to complete.'
Other highrise developers with Hamilton projects are also taking a hard look at the cratering condo market.
Slate Asset Management has planned three buildings of 27, 14 and eight storeys, with nearly 800 units between them, at the shuttered Corktown Plaza off John Street South.
Slate Asset Management has planned three buildings of 27, 14 and eight storeys, with nearly 800 units between them, at the shuttered Corktown Plaza off John Street South.
But 'in light of changing market conditions for condos sales,' Slate has 'proposed an amendment' to buyers of the first tower that would 'extend our construction financing condition timeline by one year,' a company spokesperson said via email.
The only change for buyers who accepted the proposal is the extended timeline, but full deposits with interest were refunded to those who wanted out, Slate noted.
'We remain committed to finding ways to move forward with the project, and we are working hard to realize our vision for this community.'
Real estate research firm
Urbanation's second-quarter analysis
of the GTHA new condo market tallied 502 sales, which extended a 30-year low for the sector.
Second-quarter sales were down 10 per cent from the first and dipped 69 per cent year-over-year. This second quarter was 91 per cent below the 10-year average.
Nobody wants vacant parcels.
Unsold units are piling up as GTHA developers pause condo projects with only three launching presales on 891 units in the second quarter.
Since the start of 2024 in the GTHA, 21 projects (4,412 units) have been cancelled. Of those, Urbanation noted, nine are being converted to rentals, an emerging trend as condo developers pivot from sales-dependent financing.
Meanwhile, construction starts (essentially when foundations are poured) continue to lag from previous years.
Across all housing types, Hamilton had 1,481 starts in 2024, a stark contrast from 3,347 in 2023 and 3,352 in 2022, according to Canada Mortgage and Housing Corporation (CMHC) data.
Coletara Development has paused sales on a 23-storey condo tower planned for vacant land on the edge of downtown.
The downturn has interrupted Hamilton's once-surging condo market, says Pauline Lierman, vice-president of market research for Zonda Urban, a real-estate research firm.
That's disappointing, says Lierman, a McMaster University graduate who says she was looking forward to seeing planned
residential-commercial development at Pier 8
, a city partnership with private builders, hit the market.
'That has kind of been swept under the rug.'
In April 2024, Waterfront Shores, the consortium behind the project — which calls for 1,645 residential units, including a 45-storey tower — told the city 'builder threshold profit' for the phased development's first two blocks had 'not been met.'
Lierman says it became 'very easy to churn out towers' with investors willing to buy units, but now amid the severe slowdown, developers have resorted to 'lowball pricing' to get past the financing hurdle.
Developers might opt to 'shelve' projects and 'rethink' their products, including opting for smaller buildings or shifting to rental, Lierman said.
That last option would be a good thing, Coun. Cameron Kroetsch suggests.
We definitely need more rental stock downtown.
'We definitely need more rental stock downtown,' said Kroetsch, noting nearly 80 per cent of those who live in the core are renters.
The condo crunch overlaps with a dispute between highrise developers and
Philpott Memorial Church
over the sale of the congregation's York Boulevard church.
The cited sticking point has been potential heritage protection for the 124-year-old church, a discussion that sparked concerns from Kroetsch about housing not materializing for years on the site should the church be razed. 'If you're going to tear it down, it has to be replaced with housing.'
Representatives of development partners Empire Communities and Hamilton Coliseum Place didn't respond to The Spectator's requests for comment.
With more than 90 per cent of housing in private ownership, it's 'beholden' to market dynamics, said Coun. Maureen Wilson, whose ward includes the Apex Condos.
In such a landscape, local governments are limited in what they can do, but 'nobody wants vacant parcels' of land, Wilson said.
'We know that people, density, adds to vitality, adds to economic exchange, adds to us enjoying and having more and different neighbours.'
As the market bottoms out, the residential construction sector has pressed the city for breaks on development charges, which municipalities use to pay for growth-related infrastructure.
Finance staff are examining potential relief but have emphasized foregone revenue must be recouped through property taxes and pointed to the need for senior levels of government to backstop any discounts.
Cranes in the sky are for projects that
got underway a few years ago
, but now highrise residential development is at a grim crossroads, says Mike Collins-Williams, CEO of the West End Home Builders' Association.
'Everyone in the industry is hopeful that there will be a turnaround, but I think with each passing month, there's a deeper understanding that this is a seismic shock that is going to take potentially years to navigate our way out of.'