With an abundance of confusing headlines in the media, it seems agents like myself are continuously explaining the true state of Toronto’s real estate market. The year started out with some pretty intimidating headlines. If you’re an avid real estate news follower, you may have stumbled across a couple of these stories:
“Only thing colder than Toronto right now is its housing market”
“First-time buyers giving up on Toronto’s housing market”
“Toronto home sales plummet 35% as new mortgage rule bites”
Let’s read between the (head)lines here!
Toronto’s housing market isn’t speaking to Toronto’s condo market.
First-time buyers are in the driver’s seat of Toronto’s condo market.
Toronto’s new mortgage rules are creating more of a psychological impact. Home sales are still up 12% in comparison to 2016.
As mentioned in my previous market stats blog, though the number of home sales are down across the GTA, we’re still seeing lots of activity in the central core of the city – especially in terms of condo sales. Since January 2018, we’ve seen 2,902 condo sales at an average selling price of $520,000. It’s important to note that though our market is down in the number of sales, we are still up in terms of selling price.
As the price tag associated with detached and semi-detached houses becomes more competitive and more expensive, Toronto’s condo market is getting a lot more attention from buyers and investors. Let’s take a closer look at what the condo market is doing across the city. (again – results vary by area. This is an overview for the GTA)
Mild Market Correction for Condos
From late 2016 to early 2017, Toronto’s average selling price skyrocketed. As highlighted in the graph above the market began to correct itself by May 2017 (around the time of the foreign buyer’s tax introduction) – especially when looking at the average selling price of detached homes. However, you can see that the condo market had a relatively mild correction in comparison.
Condo Market Outperforming other housing types
The condo market is outperforming detached/semi-detached houses in terms of volume of sales for the first time in 10 years. In 2017, condo sales made up 30% the of the listed and sold properties on MLS and more than half of sales in the city of Toronto were in the condo market.
Also, important to note, the second graph highlights the average annual price growth of condos, detached/semi-detached housing. Condos are up 23% since 2012. Did you buy a condo in 2012? Bet you’re happy to read this stat!
After 2017’s record year for sales, a new cost per square footage benchmark was created for the Toronto – $1000/sqft. However, this graph highlights that there are still opportunities for investors to land a property under the $1000/sqft benchmark.
Interestingly, there is more demand for smaller units because of affordability. The first-time home buyers are those hunting for 500 sq/ft, which is now up 17% in comparison to 2016.
In the last year, many large-scale developments (over 300 units) were launched, which are more geared to investors. And unfortunately, we saw a decline in the smaller developments (under 250 units) that are more for end users.
Townships surrounding the city such as Scarborough, Etobicoke and North York didn’t see many new condo developments which makes Toronto have more buying constraints and much more competition.
New Condo Inventory Low
With construction sites all across the city, it should be no surprise that we have been building a lot of new condos but we aren’t keeping up with demand. Lots of pre-construction condos are betting sold however, these sold condos aren’t breaking ground. The delays in development are affecting much of the condo market performance. We should have 10 months of new condo supply to meet our demand and currently, the supply is under 3 months. The low supply of available properties is directly aligned with why prices spiked the way they did in 2017.
Previously commenters were saying that the city was building too many condos but the stats show that we aren’t building enough given our lack of rental housing, the increases in immigration and the increased demand by people looking to live in the downtown core.
Special thanks to Urbanation for these slides and the research conducted for these statistics.