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GTA condo sales and prices hit record levels

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GTA condo sales and prices hit record levels

Condo TO web

With home prices seemingly forever on the rise, there is only one way for many GTA homebuyers to go – up, as in into highrise condos and other multi-family housing options.

Fueled largely by affordability – and the lack thereof in lowrise homes – resale condominium apartments and townhomes in the GTA now represents almost 37 per cent of total residential sales by the Toronto Real Estate Board (TREB), up from 30 per cent in 2013, according to a new report by ReMax of Ontario-Atlantic Canada Region.

ReMax report

Momentum has also been reflected in resale condominium values, which is the only property segment that held up against the 2017 market correction, ReMax says.

The average price of a condominium unit increased almost eight per cent to $551,761 between January and October 2018, up from $512,552 during the same period in 2017.

Townhomes were slightly ahead of last year’s pace, with values hovering at $571,058, compared to $568,165 in 2017. Prices of freehold properties, including single-detached, semi-detached, attached/row/townhouse and linked townhomes are all down year-over-year.

AFFORDABILITY KEY ATTRACTION

“The condominium lifestyle continues to resonate with buyers in the Greater Toronto Area for a number of reasons,” says Christopher Alexander, executive vice-president and regional director, ReMax of Ontario-Atlantic Canada Region. “While the affordability aspect is first and foremost, we’ve also a seen strong investor presence in recent years.”

Alexander cites a recent report by Urbanation and CIBC, which found that investors who bought condominiums for the purpose of renting accounted for 48 per cent of all newly completed units in the GTA in 2017. “The income potential, given today’s tight rental market, in addition to the overall return on investment, has been a serious draw for real estate investors.”

Immigration, population growth and lifestyle choices have also contributed to the uptick in demand for condo apartments and townhomes. Aging infrastructure, combined with a lack of transportation alternatives, longer commute times and the environmental component – with efforts to reduce carbon footprint – have all played a role in buyers choosing condominiums in Toronto proper that are close to both work and play, Alexander says.

DOWNTOWN THE CHOICE LOCATION

The most popular area for condominium sales remains the downtown core, with one in every five condominiums (21.9 per cent) sold in the area bordered by Bloor Street to the north, the lakeshore to the south, the Don Valley Parkway to the east and just past Dovercourt Road in the west.

“In spite of a proliferation of condominium developments over the past decade, supply and demand issues continue to persist in the core,” says Alexander. “Limited inventory continues to place substantial upward pressure on prices, with fewer affordable housing options available– and that includes condominium rentals.”

Average resale prices hover at $700,000 for condo units, with new construction closing in on $1,000 per sq. ft.

PROXIMITY TO TRANSIT

“Higher prices in the core are prompting buyers to consider condominium communities farther afield,” says Alexander. “New construction along subway lines to the north, east and west are exceptionally popular, especially with first-time buyers. Yonge Street north of Hwy. 401 comes to mind, as well as the Sheppard line between Bayview Avenue and Leslie Street. Combined, these two areas represent approximately 10 per cent of total resale condominium sales to date and continue to experience growth.”

Mississauga is the GTA’s second most popular destination for condominium living, accounting for 14 per cent of condominium sales so far this year.

Almost 51 per cent of condominium sales in the GTA occur under the $500,000 price point, but affordability is being threatened as builders and developers face skyrocketing construction costs and a land crunch within the GTA, and struggle to maintain the status quo, ReMax says.

“The necessity to ‘build up’ has never been more prevalent in a city that has seen its population climb from one census to the next,” says Alexander. “To prevent the run-up we’ve seen in housing values in the past, all levels of government must work together with developers to streamline the building process. We need to create more affordable GTA housing options that can accommodate buyers and renters at every price point.”

THE TOWNHOME OPTION

These trends generally align with the findings of another report, from Altus Group. Lack of affordability and availability of single-family new homes has buyers increasingly looking to townhomes as a lowrise home option. But supply issues in this category have seen new townhouse sales plummet in the past two years, in both absolute terms and as a percentage of total new home sales – just seven per cent of the total in the first half of 2018.

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New condos in Toronto hit record high in prices

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New condos in Toronto hit record high in prices

Toronto condos web

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.

RELATED READING

GTA new home market shows some improvement in September

GTA new home market quiet in August

 

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