The Toronto Condo market is seeing huge growth in recent months. Many potential investors are wondering if this is still a good time to invest in a Toronto condo. In this post, we will examine some of the factors affecting the rise of Toronto condo market and better determine if now is the time to buy in Toronto.
What is driving this rapid growth?
We believe this is attributable to a couple of key factors that we have discussed in detail in the past, but are all beginning to happen at an increasingly rapid rate. Here are some of the factors affecting the recent surge in the Toronto Condo market.
- Average prices for low-rise homes in the GTA are hitting unattainable levels. In August of 2016, the average price exceeded $900,000. This has lead many to look towards condominiums as alternatives.
- More buyers are looking to live closer to work and commute less.
- More and more jobs are making their way into Toronto. Companies like Coca Cola, Telus, Google, Corus Entertainment have moved their head offices into the city. It is expected that many more will follow.
High demand & low supply
We’ve covered some of the typical factors that affect to Toronto condo market. What’s happening in Toronto right now is demand continues to increase while supply is decreasing. What we’ve discovered is that condo owners are just not selling their properties. In the month of November, there were just 670 active condos listed, which is about 50% less than a year ago.
Neighbourhoods that buyers thought were oversupplied are actually grossly undersupplied
One of the big examples of this happening can be found in Toronto’s Entertainment District. There were a lot of condominiums added but the new condominiums that have been introduced to the market (The Mercer, Theatre Park) that are now being fully absorbed and prices are being pushed up.
- Studios at Theatre Park are now over $300,000 and sales have been recorded between $900-$1000 per square foot.
- Sales at the Mercer Condominiums currently average approximately $740 per square foot, however, the asking price for available listings (as of December 15th) are over $900 per square foot, which indicates a tighter market and increased demand in a short period of time.
Using the “Sales-to-Listing Ratio”
One of the key indicators that helps us analyze the strength of the market is the “Sales-to-Listing Ratio”. Simply put, the sales-to-listing ratio looks at how many condos were sold based on how many listings there were. Depending on the current ratio, we are able to better define the type of market we are in.
- Below 15% = Buyers Market
- 15-25% = Balanced Market
- 25%+ = Sellers Market (1 in 4 condos listed are sold)
Typically, Toronto is in a seller’s market situation with average around 25-30%.
In the month of November, the Listing to Sales Ratio was 94% in the Downtown Toronto Condo market, which is the highest that we have ever seen. This means that virtually every single condominium that was listed for sale in November was sold. The previous highest Sales-to-Listing Ratio recorded was approximately 75%-80%.
Examples of 2016 Condos
Below is a quick rundown of a few condos that completed in 2016.
The average price of a unit at 1000 Bay Condos in Toronto’s Discovery District now goes for roughly $996 per square foot, with many two bedroom suites selling as high as $1,300 per square foot. When the building was in pre-construction, the prices were almost 20% lower at approximately $800 per square foot.
The average price in U Condominiums is approximately $970 per square foot with numerous suites recorded over $1,000 per square foot in all suite types.
Karma Condos recently recorded multiple sales over $1,000 and has reset the price for Yonge & College. To help you contextualize the growth here, investors purchased at YC Condos for approximately $680 per square foot in 2014.
What else is happening?
Rising resale condominium prices
Prices and rental rates for resale condominiums are starting to skyrocket and many new condominium projects that are completing are hitting sale prices that many people thought were impossible. $1,000 per square foot (PSF) was once only found in areas such as Yorkville or higher end condominiums such as the Shangri La or the Ritz Carlton. Today, we are seeing sale prices of $1,000 PSF at an increasing number of condominiums across Toronto.
Rising Toronto condo rental prices
Rental prices in Toronto are trending upwards at a rapid rate, and one of the major changes we are seeing is that the percentage of renters in Toronto is also starting to trend in the same direction. This trend is common in what we see in most major cities as more people opt to rent, rather than buy in their respective downtown cores.
The recent mortgage changes
As of October 17th, 2016, the Liberal Government introduced a stress test aimed at preventing Canadians from taking on mortgages with fluctuating interest rates that they wouldn’t be able to afford. This has ultimately resulted in more would-be buyers entering or remaining in the rental pool.
Where do we see this going in the future?
2016 has been an important year in the market. Everything that we have been predicting for the condo market has started to come to fruition. We can expect to see more of the same throughout 2017. Here are and a couple of key takeaways:
1. Growing price per square foot (PSF)
The days of $600 – $700 PSF condos in the Downtown Core are long gone. We expect the new prices for core downtown pre-construction condominium projects to reflect the resale market with $800-$1000 PSF to be the new norm moving forward.
2. Steady high demand
Toronto can’t keep up with the demand. Despite the increasing number of new condos being built, demand is far outstripping supply and prices. Currently, we can expect that rents will continue upwards.
3. Increased amount of renters
We expect more people to rent and the percentage of renters in Toronto to increase to reach the standard levels set by other major cities. This is an area we will explore in a future post.
What do we advise?
While the numbers may sound scary, there has never been a better time to jump into the new condo market. The continuing growing strength of the current market is proof of the trajectory that Toronto is headed. Toronto continuing to prove itself as a world-class city, and the prices and rents will continue to reflect that.
For more insight into pre-construction condominiums and news regarding Toronto’s condo market, stay tuned to the news section on TalkCondo.