Whether you are a condo investor or looking to get into the pre-construction condominium market as a first-time purchaser, staying on top of market fluctuations is the best way to gauge the health of the market; especially before getting off the sidelines and during your journey as a condo owner.
As we round out Q2, we've noticed that tougher mortgage rules, rates and speculation taxes have yet to show a clear effect on the condo market as its continued strength speaks to the affordability crunch as much as lifestyle choices. Still, there is rising concern about the number of condo units hitting the market in the GTA. We predict that the demand will remain strong, as the population increases and economic expansion continues to grow.
Thanks to the release of stats from Urbanation's Q2 - 2019 New Condo Market Report, we’ve gathered some useful facts about the second quarter of the year so you can make the most informed condo investment possible.
Check out the numbers below.
New condominium sales in the Greater Toronto Area surged 77%, reaching our second highest sales-per-quarter-- just behind the stand-out second quarter of 2017. This is an unprecedented bounce back from the first quarter’s sales which saw just 3,065 units sold. Now, as we end Q2 with 8,902 units sold, we are headed into a robust Q3.
This quarter also saw a strong absorption of new pre-construction units, however, due to an increase of 493% more units hitting the market over the past four months, it is only natural that the number of unsold units increased accordingly. As stated by Urbanation’s report, the total number of unsold units rose 46% from a year ago while the majority of absorption in Q2 - 2019 reduced inventory from Q1-2019.
Here’s Why Q2 Was So Strong
- Some of the highest population in-flow in recent history
- The return of record-low borrowing costs
- A healthy job market
- Tight conditions in the resale market
- Huge shift in demand for fairly low-cost projects
- Large supply of units coming onto the market
If you are one of the many pre-construction condo purchasers who purchased a few years ago and now your building is complete, we know you are among those rejoicing this quarter. Q2 saw a record number of projects reach completion which explains the 21.95% drop in the number of projects currently under construction. 18,703 new condo units registered over the past year and of those units, 29% of them were rented in comparison to the 27% leased in the previous year.
Units launched in Q2 had an average sold price of $797 PSF, with remaining inventory hitting $1,000 PSF for the first time ever. From the investor’s point of view, these numbers are gratifying because they reflect a strong and growing market. But for renters, this means even higher rents. Another milestone this quarter can be seen when we look at the average resale price which surpassed $700 PSF-- a 4% increase year-over-year.
Q2 - 2019 saw the third-highest number of new project launches for a quarter. In Q2-2011 we opened with 44 projects while Q2-2017 had 41. For this quarter’s 39 new projects, the absorption rate was 64%. Of these new projects, 6 of them launched in the City of Toronto which amounted to a low absorption rate of 44%. If we were to compare The City of Toronto to 905 municipalities, the 905 had 22 new openings at an absorption rate of 71%.
Sales outside of the downtown core have been on a roll this year. North York, Scarborough and Etobicoke saw their sales double from last year while condos in the 905 region (such as Oshawa and Hamilton) rose by nearly 150 per cent. Today, the 905 region makes up 58 per cent of GTA sales (over 5,100 units sold), setting a new record for the area.
The condominium housing market for Q3 - 2019 is projected to see 26 new projects and 6,218 units launched. Due to an imbalance between house prices and the housing market, fundamentals have narrowed with prices continuing to adjust and fundamentals catching up. Over this same period last year, the young adult population grew by 1.9%, continuing to increase the pool of potential first-time homebuyers and renters. Additionally, the First-Time Home Buyer Incentive (FTHBI) will commence just at the top of Q3 which will surely contribute to the inflation of new buyers entering the market and making the race to secure a unit even tighter.
For those jumping at a chance to buy in the City of Toronto, according to Urbanation, the 416 will offer 15 new pre-construction projects throughout Q3-- with approximately 4,259 units hitting the market.
Second-quarter results for the resale condominium market also showed stable conditions and modest growth in sales and prices. Sales in Q2 grew 5% from this time last year which is the best quarterly performance since 2017. Additionally, resales saw an above-average, quarter-over-quarter jump of 48%, indicating that activity in this market is on the rise.
Nevertheless, with all this resale market activity, condominium listing activity remained relatively unchanged from a year ago. The resale market remained tight this quarter with a sales-to-listing ratio peaking at 65%; staying in line with the GTA average over the past six quarters. These numbers indicate that it is still a seller’s market as the average listing time on the market remained below 20 days. These conditions supported an annual price appreciation rate of 4.1% for average resale values, which reached a new high of $713 PSF.
Want to learn more about the pre-construction condo market? Our skilled and professional agents are available for one-on-one consultations to further explain how these numbers can affect your investments. Connect with us today.