New condos in Toronto hit record high in prices
The new condo market in Toronto heated up in the third quarter, with average prices exceeding $1,000 per sq. ft. for the first time, and sales jumping four per cent year-over-year to reach the highest third-quarter volume in the last 10 years.
“The condominium market has performed exceptionally well during its transition from an overheated 2017,” says Shaun Hildebrand, president of Urbanation Inc., in releasing the firm’s Q3-2018 condo market results. “Low supply and stabilized demand should continue to provide structural support for prices. However, signs of a slower pace of price growth ahead, from factors including rising interest rates and higher completions, should be factored into decision making with respect to purchasing investment units.”
Quarterly new condominium sales have settled into a relatively steady pace in recent quarters, following frenetic levels in 2017, Urbanization says.
However, the market appears poised to receive a boost in the final months of the year as a significant number of new units launch for pre-sale, which should be met by strong demand, given current trends.
The average opening quarter absorption rate for new launches has remained above 55 per cent for 11 straight quarters dating back to Q1-2016 (averaging 58 per cent in Q3-2018). This was not solely reflective of increased investor activity, as projects with a mix of buyers, as well as those geared primarily to end-users, have been achieving high absorptions upon opening.
Not every project is selling quickly, Urbanization cautions. Eight of 17 projects launched in Q3-2018 sold less than 30 per cent of their units, compared to only one of 15 launched in Q3-2017 — illustrating increased price sensitivity, a dispersion of new projects across the GTA region, and the importance of a strong marketing campaign. High price points in the current new condominium market should prevent another sustained resurgence in sales activity in the immediate future.
Other highlights include:
- New condominium apartment sales in the GTA increased four per cent year-over-year to 4,738 units in Q3-2018, reaching the third highest Q3 volume of the past 10 years
- Year-to-date sales of 14,055 units were down 46 per cent from the record high of 25,839 sales recorded during the same period last year
- Resale condominium apartment sales grew two per cent annually in Q3-2018 to 5,253 units, marking the first annual increase since Q1-2017
- Unsold inventory of new condos in development increased two per cent quarter-over-quarter and 22 per cent year-over-year to 9,927 units, although remaining 33 per cent below the 10-year average of 14,806 units. Unsold inventory equaled 5.2 months of supply, rising from 5.1 months in Q2-2018 and 3.0 months a year ago in Q3-2017
- Despite the growth in supply, the average sold price for all actively marketing projects in Q3 increased 11 per cent annually to $745 psf, with asking prices for unsold units up 19 per cent to an average of $972 psf. Within new projects that opened for pre-sale during the third quarter, prices averaged $745,416, a 33-per-cent jump from a year ago ($562,340). The average size of a new unit launched in Q3-2018 was 714 sq. ft., resulting in average per square foot prices for new launches rising past $1,000 for the first time ($1,044 psf)
- Average resale condominium prices grew by 6.5 per cent year-over-year to $690 psf, or $577,000 based on an average size of 837 sq. ft, representing a sharp deceleration from the 27-per-cent annual pace recorded a year ago in Q3-2017
- Construction started on a record 8,150 new condominiums in Q3-2018, raising the total number of condos under construction to a new high of 67,581 units in 236 buildings. Projects under construction were 95-per-cent pre-sold on average.