Condos have been all the rage over the past few years, and it is likely that that trend will continue. However, with a boom in condo developments last year, this year’s number of developments has seen a significant decrease, leading to 56 per cent fewer sales than 2017’s second quarter.
The slowdown is likely to pave way for Toronto’s expected to be hot rental market. Pauline Lierman, Director of Market Research for Urbanation, said, “I’ve been through a number of peak market cycles over the last 15 to 16 years… After every cycle where we hit like we did last year… there’s always a slowdown because a lot of it is ramped-up acceleration.”
“Because the market was so hot, everything would sell out within an insane period,” she said. “(Developments) moved forward that may not have come to the market until earlier this year.”
According to Urbanation’s second-quarter report, pre-construction condo buyers have become much more cautious after the vast increase in prices last. Approximately 56 per cent of nearly 5,800 units that came on the market were sold this year, as compared to the significant 80 percent of the over 9,500 units that were purchased in the second quarter of 2017.
Over the past few years, prices for newly launched condos grew 18 per cent year over year, averaging about $835 per square foot, just a bit shy from the increase at the end of last year, where condos were averaging $954 per square foot.
Even though the number of condo sales decreased 17 per cent in the second quarter, prices have increased 5 per cent on average, a significantly lower rate of growth compared to the same period last year. Prices are continuing to grow because of the short supply of listings.
Higher mortgage rates and rising labour and material costs are all contributing factors that are affecting developers’ costs. “You add all those together and you see a bit of a slowdown in terms of bringing stuff to market,” said Lierman.
An expected influx of completions over the next couple of years will add numerous rentals to the market since so many new developments are purchased by investors.
“I can see things starting to ease off in the heightened level of constraint that we’ve had in terms of supply, in terms of rent growth. There’s going to be more out there,” she said.
Renters are going to have to determine what their budget is, and investors will have to figure out what price of rent will be able to cover their costs.
If you’re in the market for a condo, whether existing or pre-construction, Millennial’s Choice can help you find what you are looking for. Please send us an email at firstname.lastname@example.org for more information.