Housing in Toronto is expensive.
This isn’t new information. We’ve all seen the news articles about tear-down homes selling for a million dollars, or homes selling for a million dollars over asking price. As entertaining as those stories are, they have always been confined to the fully detached or semi-detached home market. That is, until now.
These stories are emerging for a different type of housing, one that has always been considered a more affordable and plentiful form of housing: condos. The condo boom has officially arrived in Toronto.
Taller Demand for Towers
So what’s driving condo demand to levels comparable to detached homes?
The supply of houses in Toronto has been dwindling steadily for the several years, resulting in sky-high prices. Every year, new records are set, including this year. In January, the average detached home in Toronto sold for $1,336,640 – a new record and a 26.8% jump from January 2016, reports the Toronto Real Estate Board.
As these single detached homes continue to rise in value, many homebuyers who would traditionally look to purchase a home with a backyard are turning to Toronto condos, which has resulted in record high-rise sales. In 2016, a total of 27,217 condos changed hands in the Greater Toronto Area. That’s a rise of 34% compared to 2015 and an all-time high, beating out 2011, the previous record holder.
Changing Buyer Expectations
The increase in new condo sales represents a fundamental shift in how Canadians are buying Toronto real estate. A decade ago, about 70% of new Toronto real estate went to low-rise housing stock and 30% went to condos; today, that ratio is reversed, with 70% of sales going to condos and 30% going to low-rise, according to an account reported by the Globe and Mail.
Matthew Boukall, senior director of residential products of Altus Data solutions, stated at TREB’s economic outlook meeting, “We’re seeing in the entire GTA a substantial shift into the new home market and consumers looking for an apartment unit. We know consumer demand is stronger for low-rise product, we just don’t have the supply.”
While this shift in buying behaviour is out of necessity as would-be homebuyers look for affordable options, is there going to be enough supply to meet the demand? In the last year, condo sales have increased by double digits, while new listings were down by 13.4% according to the GTA Realtors Condominium Market Statistics report. These changes have turned the once affordable condo market into in a cut-throat landscape where bidding wars and extravagant offers are commonplace.
More New Builds to Come
With low supply driving up prices in Toronto and for Mississauga condos and other adjacent areas, new condo starts are required to loosen up the supply and keep this type of housing affordable. The number of new condo construction peaked in 2012, but savvy builders have been watching the market, and new condo construction will surely increase as this surge in demand and record low supply indicates that the market isn’t overbuilt or even balanced. According to Urbanation Inc., unsold condo inventory in Toronto was just 9,932 units at the end of 2016. That is a 47% decline from 2015, and too low for the market to be considered balanced.
While we wait for builders to get moving and provide the supply the city needs to return to a balanced condo market, many Torontonians can’t afford to wait. More and more are already turning to Mississauga condos as an alternative, while other buyers are searching for homes in Scarborough, Hamilton and some cases as far as Niagara for affordable options.
