Housing activity is expected to rebound in the Greater Toronto Area over the next couple of years, with condo apartments leading the way in sales and construction, according to The Canada Mortgage and Housing Corporation’s (CMHC) new Housing Market Outlook for Canada.
A population influx, more jobs and lower interest rates will all fuel buyer demand. The market also predicts housing starts in the Toronto area will increase from this year’s average between 28,600 and 32,100 to 31,500 and 36,800 next year, with up to 30,500 in multi-unit buildings.
The condo market, currently in sellers’ territory with a sales-to-listing-ratio around 70 per cent, will likely see above average price growth soon, particularly within the city and downtown cores of certain 905 areas, which are experiencing a huge supply crunch.
CMHC forecasts the average home price will rise to an average between $765,300 and $898,400 by the end of next year. In 2021, the price is expected to further jump to an average between $771,000 and $949,400. The average price currently stands between $740,600 and $854,600 for 2019.
Prices will continue to increase, but not at the pace the market experienced in the last two years, according to Dana Senagama, CMHC’s principal market analyst for Toronto.
“If we continue to see strong rental demand, immigration and rising house prices, there will be higher demand for condo apartments. We should see prices go up.”
She says condos have been the “saving grace” in this high-priced housing market and remain a more affordable option for new home owners in Toronto. Single-detached homes average above the $1 million mark, while a townhouse nears $800,000 to $900,000 on average. Condos average around $500,000 for resale or $650,000 for a new unit, still more expensive than the average Canadian home.
A lack of purpose-built rentals and changing demographics will keep the vacancy rate low and rental demand steady. Investors currently rent out about one third of condos in Toronto.
Zev Mandelbaum, president and CEO of Altree Developments and a third-generation developer based in Toronto, is seeing more people invest in condos as a source of income for later stages of life, such as retirement. He also sees investors who use renting as a way to try out a neighbourhood before putting roots down or to acquire a more disposable income.
User demographics are also boosting demand.
“Older people want to change their housing style, creating a market for new housing on a smaller-scale,” he says. “Boomers are looking at retirement and want the comforts of a small tight-knit community with less maintenance. Millennials are getting older with families and are getting used to urbanization.”
He says the new housing outlook reassures him that Toronto is a healthy place to build.
“It affirms that what we go through in the market during a lull is often driven by sentiment or international politics. It affirms housing is coming back and there is a real need for it.”
Every year, people move to Toronto looking for a place to live. The city’s population is predicated to rise from about 2.96 million to 4.27 million in 2046, an increase of 44.5 per cent in the next three decades or so.
“Imagine how many different needs, backgrounds, different family sizes and relationships there are,” Mandelbaum notes. “It is so diverse and it’s what makes Toronto so amazing.”
He says a developer can’t build without thinking of the growing diversity that emanates through the city, and this growing demand means creating a product mix that appeals to everyone. A good product, in turn, also helps the neighbouring communities.
“When you’re developing something, you’re not just putting up a building; you’re creating a habitat for all types of people,” he says. “There may be 40 types of backgrounds in your building from nationalities to demographics. It is a habitat within the city that surrounds it.”