Canada's Condominium Magazine
Urbanation Inc. released its annual market results on Thursday, in which highlights include high condo and apartment sales, record low inventory surplus, and more. Over 35,000 condo units sold across the Greater Toronto Area last year, which represented a growth of 30 per cent over the previous year and a rate 75 per cent higher than the area’s 10-year average of 20,000 sales.
Inventory dropped by 26 per cent and remained under 8,000 units throughout 2017, causing prices to rise by 35 per cent. Although developers will remain busy with new launches, they are also expected to take a more cautious approach due to delays and uncertainty in obtaining approvals. Likewise, developers have been faced with tighter resources constraints, which resulted in double-digit construction cost increases throughout the past year.
Increased investor activity is anticipated for 2018, largely due to strong return rates, steady price growth, and rapidly rising rents. Urbanation factored in an 80 per cent loan-to-value mortgage, condo fees, and taxes in calculating cash flow in the rental market. According to their calculations, newly completed condominiums were able to generate cash flow, although they advise investors to act less aggressively over the following year due to variables such as capped rent increases and stricter mortgage qualifications.
Urbanation also calculated the resale rates for condominiums that were traded within short periods of time. Units that were purchased and resold within a 12-month timespan reached resale peaks of 4 per cent in the first quarter. This fell to 2.9 per cent in the fourth quarter, which was lower than the share a year prior. For units which were purchased and resold within only six months, the share was 2.1 per cent in fourth quarter 2016 and first quarter 2017, dropping to 0.8 per cent in fourth quarter 2017.
Average condo rent in the Greater Toronto also increased by 10.3 per cent in 2017, according to the report. Monthly rents reached an average of $2,219 for units averaging 743 square feet. Smaller, less expensive units declined on lower supply levels, and one-bedroom rentals dropped by 11 per cent, while studio rentals saw a 3 per cent decrease. High demand resulted in an average of only 10 days on the market for rental units.
A five-year low for completions is also projected to pick up over the next three years. Estimates show that completions will reach 22,395 units in 2018, 25,124 units in 2019, and 28,432 in 2020. Annual deliveries, however, have averaged approximately 7,000 fewer units than scheduled in recent years, which mean that actual completions will likely be lower than projected.
“While the results for 2017 prove how remarkably strong demand can be for GTA condos, the level of activity underway is putting the industry under tremendous pressure to push the units through the development cycle,” said Urbanation’s Senior Vice President, Shaun Hildebrand. “A more sustainable pace of roughly 26,000 sales is likely in store for 2018.”