Affordability is driving the increase in multi-unit home sales, as resale condominium apartments and townhomes in the Greater Toronto Area (GTA) now represent nearly 37 per cent of total residential sales, reports RE/MAX of Ontario-Atlantic Canada Region. The market share of this segment has been trending higher since 2013, when condominium sales represented 30 per cent of all home sales.
In total, nearly 25,000 condominium townhomes and apartments have been sold in the GTA between January and October 2018. Although overall condominium sales are 14 per cent below last year’s levels, the gap is slowly closing.
This momentum has also been seen in resale condominium values, which is the only property segment that remained firm against the 2017 market correction. The average price of a condominium apartment climbed nearly eight per cent to $551,761 from January to October 2018, up compared to $512,552 during the same period last year. Townhome sales were slightly higher than last year, with the average price reaching $571,058, compared to $568,165 last year. Prices of freehold homes, including single-detached, semi-detached, attached/row/townhouse and linked townhomes all declined on a year-over-year basis.
“The condominium lifestyle continues to resonate with buyers in the GTA for a number of reasons. While the affordability aspect is first and foremost, we’ve also seen a strong investor presence in recent years,” said Christopher Alexander, executive vice president and regional director, RE/MAX of Ontario-Atlantic Canada Region.
According to a recent report by Urbanation and CIBC, investors that purchased condominiums in order to rent them out 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,” continued Alexander.
Immigration, population growth and changing lifestyles have also contributed to the increase in demand for condominium apartment and townhomes. Aging infrastructure as well as a lack of transportation alternatives, longer commute times and efforts to reduce carbon footprint have all contributed to buyers electing to buy a condominium unit in the City of Toronto that would be closer to both work and play, said Alexander.
The most popular region for condo sales in Toronto remains the downtown core, with 21.9 per cent of condominiums 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 beyond Dovercourt Road to the west.
“In spite of a proliferation of condominium developments over the past decade, supply and demand issues continue to persist in the core,” continued Alexander. “Limited inventory continues to place substantial upward pressure on prices, with fewer affordable housing options available – and that includes condominium rentals.”
Backing that up is the fact that there is only about six weeks of inventory currently available in downtown Toronto (1.75 months for townhomes and 1.4 months for condo apartments), with a market absorption rate of 69 per cent for condos and 57 per cent for townhomes. Meanwhile, the average resale price sits at around $700,000 for condominium apartments, with new construction units close to $1,000 per square foot. In the GTA, condominium apartments are sitting at 1.7 months of inventory, while townhomes are at 2.1 months.
“Higher prices in the core are prompting buyers to consider condominium communities farther afield,” said 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, as well as the Sheppard Line between Bayview Avenue and Leslie Street. Combined, these two areas represent approximately 10 per cent of total resale condominium sales to date and continue to experience growth.”
Mississauga accounted for 14 per cent of condominium sales so far this year, making it the GTA’s second most popular region to purchase a condo.
Currently, nearly 51 per cent of condominium sales in the GTA were under the $500,000 price point, but affordability is being threatened as builders and developers face rising construction costs and limited developable land in the GTA, making it difficult to maintain sales at the current level.
Meanwhile, condo sales for homes that range between $500,000 and $699,999 climbed three per cent year-over-year (8,274 sales, compared to 8,059 in 2017). For luxury condominium apartments and townhomes over $2 million, year-to-date sales are up two per cent year-over-year, with 143 units sold so far in 2018, compared to 140 sales during the same period of 2017.
“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,” added 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.”