Canada's Condominium Magazine

New Condo prices up for Q3 2017 to $816 per square foot for unsold inventory in Toronto reflecting increased demand for condominium apartments

New condo pricing increased to $816 per square foot in Q3, 2107, for unsold inventory. Pre-build prices per square foot may not reflect inventory prices. As previously reported in Condo.ca, this is due to increased demand for condominiums in the GTA — also reflected in higher prices for resale condominiums — as other home types moved out of reach for many buyers. Condo.ca reported on a Ipsos Reid poll showing a sharp shift towards condominium apartments as a preference in Toronto, especially in pre-build condos. [See “Pre-Build Condos Growing in Popularity”>>]

 

New report from Urbanation for 3rd quarter 2017 show increases in price per square foot for new condominiums.

 

The good news — inventory up slightly

The good news is that unsold inventory in condominiums increased “for the first time since Q4-2015, rising to 7,618 units after falllingto a 15-year low of 6,688 in the previous quarter,” according to a report from Urbanation, who track the new condominium data. The bad news, depending on the location you prefer, the downtown core (former City of Toronto) is pricing at around $991 per square foot for unsold new inventory.

Although the slight increase in inventory is good news, 7,618 represents 47% below the 10-year average inventory of 16,304. Again, this reflects substantially increased demand. More projects will need to come online to fulfill increasing demand for condo apartments.

With resale market inventory also low — especially relative to the demographic situation in Toronto — this keeps the pressure upwards on price. Sales of new condos  moderated somewhat, after turmoil caused by new rules from the Ontario government, dropping to 4,577 condo apartments sold in Q3, 2017. This represents a “30% decline from last year as fewer projects came to market following an explosive first half that saw new launches more than double and sales soar by 67%,” concludes Urbanation.

 

Live construction camera view of Ten York by Tridel, rising elegantly in the downtown core of Toronto. Despite numerous new quality projects from developers such as Tridel, inventory remains low as condominium preferences increase. Date of live view November 1, 2017 9am. Image from Ten York website>>

 

A new record — 26,452 new condo units sold

In the first nine months of the 2017 year, which saw a high-demand market in the first few months, followed by a “wait and see” pause after new rules were imposed, 26,452 new condominium units sold. It is anticipated that up to 12,000 additional condo units could move in the final quarter. Urbanation projects 2017 at 34,000 new condominium units sold.

If this projection proves out, this would far surpass “last year’s record of just over 27,000 sales and the previous peak of approximately 26,000 units in 2011,” reports Urbanation

Urbanation also predicts 2018 will see a “slowdown in sales” over 2017, which may move inventory levels up somewhat, helping moderate pric increases.

 

The new Auberge from Tridel is typical of what condo buyers prefer: prime location, luxury and size. Increasingly, people in the condo market are buying pre-build. Auberge website>>

 

Resale and new condos diverge

According to the report, new condo pricing is diverging from the resale market trends:

“Resale condo apartment prices averaged $648 psf in Q3-2017, edging down slightly from the previous quarter ($650 psf) for the first time in three-and-a-half years as sales declined 26% year-over-year following the Ontario Government’s Fair Housing Plan introduced earlier in the year. However, market conditions remained firm with a sales-to-listings ratio of 60% (a balanced market is between 35% and 50%), keeping resale condo prices 27% higher than a year ago — a deceleration from the 31% annual growth recorded in Q2-2017.”

 

Demographics for Canada’s city indicate pressure on prices will continue. In Toronto, the population increases annually by 109,000 (rounded). Demand for housing increases by 35,000 per year, while capacity and inventory of both homes for sale or rent is low.

 

Rise or rental properties

One of the reasons cited by the report for the increased popularity of new over resale is the “quick rise in rents” which has been motivated by a very limited supply of vacant rental properties. New condos are generally prefered by people intending to rent for income.

The rental market currently relies heavily on condominium owners to fill gaps in supply from more traditional landlords. With the short supply, and some people in “wait and see” mode for new housing, this situation is projected to worsen. The rental market is already a “Landlord’s market” with “any price goes” on the front end. [Condo.ca previously reported on the shortfalls in rental properties>>]

 

With Ontario’s shortage of rental homes it is obviously enticing to “become a landlord”.

 

Average rents increased

As Condo.ca reported, rents are on the rise on the “front end.” Due to new rules that limit increases to existing tenants, landlords are front-loading their profits with new tenants. With short supply, this Landlord’s market has driven prices up “10% annually to $2.98 per square foot as condo completions fell to a four-year low of approximately 15,000 units in the last 12 months.

Urbanation, however, reports on the increase in number of units under construction (as opposed to completion), which is at a “three-and-a-half year high of 54,715 in Q3 2017” — with completions projected to be 20,000 units in 2018. Urbanation adds that completions “could surpass the previous high of 21,000 units in 2014, easing some pressure off the rental market” in 2018.

“After closing out 2017 with a record year, the new condo market is poised for moderation in 2018. A more cautious approach for both developers and buyers in the coming months will help to ensure the transition to a more sustainable pace of activity is orderly”, said Shaun Hildebrand, Urbanation’s Senior Vice President.

Via-Bloor-Tridel
Auberge on the Park-Tridel
Bianca-Tridel-Annex

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