Condo affordability propels market share (and price) to peak levels in the GTA in 2018
Condominiums represent almost 37 per cent of total residential sales, up from 30 per cent in 2013
Condo affordability is fuelling the rise of vertical growth, with resale condominium apartments and townhomes in the Greater Toronto Area (GTA) now representing almost 37 per cent of total residential sales on the Toronto Real Estate Board (TREB). Market share for this segment has been trending upward since 2013, when the transfer of condominiums represented 30 per cent of total sales, according to a new report by RE/MAX of Ontario-Atlantic Canada Region.
Momentum has also been reflected in resale condominium values, which is the only property segment that held up against the 2017 market correction. The average price of a condominium apartment increased almost eight per cent to $551,761 between January and October 2018, up from $512,552 during the same period in 2017. Townhomes were slightly ahead of last year’s pace, with values hovering at $571,058, compared to $568,165 in 2017. Prices of freehold properties, including single-detached, semi-detached, attached/row/townhouse, and linked townhomes are all down year-over-year.
“The condominium lifestyle continues to resonate with buyers in the Greater Toronto Area for a number of reasons. While the affordability aspect is first and foremost, we’ve also a seen strong investor presence in recent years,” says Christopher Alexander, Executive Vice President and Regional Director, RE/MAX of Ontario-Atlantic Canada Region. Alexander cites a recent report by Urbanation and CIBC, which found that investors who bought condominiums for the purpose of renting accounted for 48 per cent of all newly completed units in the GTA in 2017. “The income potential, given today’s tight rental market, in addition to the overall return on investment, has been a serious draw for real estate investors.”
Immigration, population growth, and lifestyle choices have also contributed to the uptick in demand for condo apartments and townhomes. Aging infrastructure, combined with a lack of transportation alternatives, longer commute times and the environmental component—with efforts to reduce carbon footprint—have all played a role in buyers choosing condominiums in Toronto proper that are close to both work and play, explains Alexander.
The most popular area for condominium sales remains the downtown core, with one in every five condominiums (21.9 per cent) sold in the area bordered by Bloor Street to the north, the lakeshore to the south, the Don Valley Parkway to the east and just past Dovercourt Road in the west (TREB districts C01 and C08).
“In spite of a proliferation of condominium developments over the past decade, supply and demand issues continue to persist in the core,” says Alexander. “Limited inventory continues to place substantial upward pressure on prices, with fewer affordable housing options available—and that includes condominium rentals.”
To illustrate, only about six weeks of inventory is currently available for sale in the downtown core (1.75 months for townhomes and 1.4 months for condo apartments), with a market absorption rate of 69 per cent for condo apartments and 57 per cent for townhomes. Average resale prices hover at $700,000 for condo apartments, with new construction closing in on $1,000 per square foot. In the GTA, months of inventory for condominium apartments sit at 1.7, while townhomes hover at 2.1.
“Higher prices in the core are prompting buyers to consider condominium communities farther afield,” says Alexander. “New construction along subway lines to the north, east and west are exceptionally popular, especially with first-time buyers. Yonge Street north of Hwy. 401 comes to mind (C07 and C14) as well as the Sheppard line between Bayview Avenue and Leslie Street (C15). Combined, these two areas represent approximately 10 per cent of total resale condominium sales to date and continue to experience growth.”
Mississauga is the GTA’s second most popular destination for condominium living, accounting for 14 per cent of condominium sales so far this year.
At present, almost 51 per cent of condominium sales in the GTA occur under the $500,000 price point, but affordability is being threatened as builders and developers face skyrocketing construction costs and a land crunch within the GTA, and struggle to maintain the status quo.
“The necessity to ‘build up’ has never been more prevalent in a city that has seen its population climb from one census to the next,” says Alexander. “To prevent the run-up we’ve seen in housing values in the past, all levels of government must work together with developers to streamline the building process. We need to create more affordable GTA housing options that can accommodate buyers and renters at every price point.”