Downtown Toronto’s condo market prices and new builds slowed down from the crazy highs of the last few years, with pre-construction sales numbers at a fives-year low in the part of 2019, even with construction everywhere from a record number of buildings across the city.
With over 80 per cent of the record 61,374 condos currently being under construction were already sold prior to this year.
There were over seven new projects, containing about a total of 1,729 units, launched in the first part of the year according to construction industry research data from the industry. That number compares to over 4K units in the same period last year and over 6K in the first part of 2017.
The exact number of units finished in the second quarter of this year could hit the low five figures. When they hit the market in the peak spring season it will be a good test of the 2019 market overall, according to industry folks.
The first part of the year indexed average selling prices rose almost 2 per cent compared to the last quarter of last year — to almost $800 per square feet from $776 which was almost a 10 per cent increase year over year. In downtown Toronto, where the supply of condos is very tight, the average asking price rose over 10 per cent to a record $1,276 per sq. ft. on average. The average price of unsold condos region-wide rose almost 10 per cent compared to the first quarter of last year to almost 1K per sq. ft.
Even with these numbers a few projects were cancelled by developers, who are very afraid of that, and land prices and development costs keep going up so they have to be careful when looking at prices the market is going to support the prices in the Toronto condo market. Offshore condo investors have accounted for a large part of the condo buyers in Toronto. Overall investors from Canada and overseas have increased in three years to about 60 or 65 per cent according to condo industry data.
When prices get too high, investors won’t buy. There have been some examples of new condos being priced to high that haven’t sold as well as was expected. In other cases, well-located (ie near subway and transit) and decently priced condos have sold extremely well sometimes in a matter of days according to industry data. Some developers with really good locations sites that are looking to get higher values are waiting to see if perhaps the market could go up even higher. New condo prices rose by more than 50 per cent in the last two years. Some examples include the 707 Lofts for sale which is located right on the Bloor subway line making it a perfect resale example.
The high price of certain condos and the low demand on prices of other kinds of homes, such as townhouses, rowhouses, semi-detached homes, are also refected in sales data. Price differences are a lot smaller today than what they were a few years ago according to industry data adding that the mortgage stress test is affecting some first-time buyers for who new condos are the entry-level home.
Industry folks say that long term hold strategy is key in the current market. People should be cautious about investing at a condo prices that’s exceptionally higher when you look at comparable resale condo buildings, but if you’re looking to hold onto the condo unit they feel it should not be a concern.
Do not look to buy a condo now and sell it in two years expecting to make alot of money. If you’re in the condo market to look for a condo you may want to wait a little while to see if there is an opportunity with the downtown units that are being built on the new LRT lines or if you’re purchasing in certain areas today just have a longer time line and recognize price increases year over year are already starting to slow down. You can examine Toronto resale condo data at the Toronto Real Estate Board website.
Some areas are only growing at a 3 per cent per year compared to the 10 per cent rate that some people saw earlier. The market has returned to previous indutry standard returns.