Toronto’s preconstruction condominium market has bounced back, and although not quite there yet, the 905 gave the 416 a run for its money last quarter.
According to Urbanation, the 9,001 new condo sales in the Greater Toronto Area in Q2 came close to breaking a quarterly record, established in 2019, but fell short by a mere 74 transactions. However, the urban and suburban condo markets had a healthy quarter, with the latter comprising 58% of all activity.
In Q2-2021, 8,490 condo units were brought to market, 81% of which were absorbed—a record, says Urbanation—at an average price of $728,160 using a median unit size of 656 sq ft, which worked out to $1,110 psf. In the City of Toronto, new launches in the second quarter averaged $834,504, or $1,276 psf, while the average 905 price was $661,537, or $1,007 psf.
New condos in the 416 are still the premium, but something is occurring in the 905, says Ron Sally.
“People are looking for space, and if you want space in the city you have to pay a bit more, but for those who can’t afford those price points, the second-best option is the 905 area,” said Sally, owner of RE/MAX Millennium Real Estate. “Most people want easy access to highways and an urban lifestyle, and in parts of the 905, like Vaughan and Mississauga, there’s so much growth that they’re becoming cosmopolitan cities.”
The spread between detached homes and condominiums is widening, and every time that happens condo sales begin rising for reasons to do with affordability.
“People who wanted to live in the 905 last quarter wanted to purchase houses but those were unaffordable, so they went with condos, which were comparatively affordable,” continued Sally. “If they couldn’t afford that $1 million-plus price tag, they decided to buy a condo and work their way up property ladder.”
The B-20 stress test, implemented by the Office of the Superintendent of Financial Institutions in June, raised the floor rate to 5.25% from 4.79%, and it is believed to have reduced purchasing power by 4-4.5%. According to Elan Weintraub, co-founder and director of Mortgage Outlet, the stress test may have played a role in buyers choosing 905 condos last quarter.
“You’ll get more value for your money buying a 905 condo,” he said. “Affordability plays a role in this but the other thing that happened in June was the stress test, and you can afford more space in the 905 for what you qualify for in the 416. People don’t want to live in a 500 sq ft condo downtown when they can go to the 905 and afford 20-30% more space at similar price points.”
Transactions in Q2-2021 were 5.5 higher than what they were in the second quarter of 2020, when sales were a paltry 1,637.
Unsold inventory for the quarter declined by 10% year-over-year to 11,716 in the GTA, marking the lowest total in 11 quarters and falling 23% below the 10-year average of 15,179, noted Urbanation. The average price of unsold units in the region rose by 9% year-over-year to a record-high $1,196 psf.
Construction of new condominiums in the GTA increased by 11% in Q2 compared to a year earlier, setting another record of 86,346, while there were 22,857 units in active projects in the preconstruction phase. Urbanation’s data also revealed there were 3,271 completed units last quarter, with another 10,938 more slated for completion in H2-2021, bringing the estimiated total for the year to 18,157—a 19% year-over-year decline from 22,473 in all of 2020.