New Condo Sales Explode in the GTA
A few short years ago, armchair real estate experts wrung their hands about the condo explosion that was overtaking Toronto and the GTA and claimed that buyers would be left with low-value units in a vastly over-saturated market.
It appears that fate has not come to pass.
According to data recently released by Urbanation, a leading source of information and analysis for the Toronto and GTA condo market, the new condo market is surging while the resale market is moderating.
Urbanation reports a total of 12,138 new condo apartments were sold across the Greater Toronto Area in the second quarter of 2017, setting a second consecutive quarterly record and rising 62 per cent year-over-year. The report notes that the 21,968 units sold during the first six months of 2017 surpassed 12-month levels averaged over the past 10 years (19,997 units).
The latest 12-month total of 35,954 sales was 36 per cent higher than the previous peak reached in the first quarter of 2012 at 26,421 sales.
When the real estate market was at its most intense in the winter months, experts pointed to a lack of supply as a key factor in price trends. While data indicates the real estate market as a whole is finally cooling, it appears demand is still outpacing supply as far as new condos go.
"Demand continued to outpace supply as 11,849 new pre-construction units in 41 projects were brought to market in Q2-2017, which broke the previous record for new launches set in Q2-2011 (9,182 units)," the report reads. "Of the new units launched in the latest quarter, a record high 80 per cent were pre-sold by the end of June."
Urbanation says that, overall, 94 per cent of the 110,772 units across all stages of development were sold, leaving an unsold inventory count of 6,794 units -- the lowest level in 15 years and equal to only 2.3 months of supply.
But while low-rise houses may be getting slightly less expensive month-over-month, major dips aren’t as prominent in the condo market.
Urbanation reports that the average price for sold units was $647 per square foot (psf), growing 10 per cent year-over-year and returning to double-digit growth for the first time since the first quarter of 2012. Selling prices for new units launched in the second quarter of this year averaged $757 psf, while asking prices for unsold units grew 28 per cent from last year to $778 psf.
The report also notes that a record 12 projects sold for over $800 psf, with several approaching and surpassing the $1,000 psf mark.
While that sounds alarming, there might be some relief for buyers looking to purchase pre-owned units.
Urbanation says resale condominium apartment activity fell four per cent year-over-year, the first decline recorded for resale condos in four years. The moderation in sales followed a 25 per cent increase in the first quarter of 2017, and came on the heels of the provincial government's new housing policies introduced in April (such as the 15 per cent tax on foreign buyers and speculators).
"While resale price growth accelerated to 31 per cent on an annual basis in Q2, reaching $650 psf, median monthly selling prices fell by six per cent between April and June,” the report reads. “However, overall market conditions remained strong during the quarter, with a sales-to-listings ratio of 69 per cent staying well within seller's market territory, average days on market dropping to a record low of 12, and active listings sitting 20 per cent below their decade average and equal to just 1.4 months of supply.”
"The calming of resale prices in recent months and lower potential yields on rental investments due to high prices in new projects should lead to less frenzied demand in the second half of the year", said Shaun Hildebrand, Urbanation's Senior Vice President. "While the current pace of new condo sales shows a remarkable level of confidence in the GTA housing market, activity has reached an unsustainable level for the near-term. Market fundamentals, however, still appear supportive of prices" added Hildebrand.
So, if you're in the market for a new condo, you might have better luck with a resale unit. And if you're selling your unit, well, you're still in a good spot to do so.