Condominium construction starts in the GTA reached a record 7,981 units in Q2-2018, according to Urbanation Inc.’s recent quarterly condo market results. The total number of condo units under construction also reached a high of 63,903 units, 95 per cent of which were pre-sold. Construction was driven higher by a record number of new condo pre-sales in 2017.
The decrease in new condo activity this year was expected following last year’s record-breaking pace of activity. In the first half of 2018, sales were down 58 per cent year-over-year to 9,058 units, compared to the 21,316 units sold in the first half of 2017. This figure is also 13 per cent below the 10-year first half average of 10,471 sales.
New condo sales fell by 56 per cent year-over-year in Q2-2018 to 4,977 units, due to fewer new project openings and absorptions moderated to their longer-term average. In Q2-2018, there were 5,759 units brought to market in pre-construction projects, with 56 per cent of those pre-sold by the end of the quarter, compared to an 80 per cent opening absorption of the record 9,521 units launched in Q2-2017.
“Fewer new pre-construction condo sales this year will help to keep the supply pipeline in check as construction starts and completions move to new highs over the next couple years,” said Shaun Hildebrand, president of Urbanation, in a press release. “Ultimately, low unsold inventory and a stabilizing resale market will provide support for the new condo market in the second half of 2018.”
New condo sales are heavily dependent on activity from investors, whose interest in the market is dependent on the outlook for investment returns. Developers have reacted to this changing market environment by launching fewer developments, as new openings declined by 51 per cent annually in the first quarter of 2018. This has helped keep inventory levels low and prices relatively steady at elevated levels, compared to last year.
The average opening price for new condo launches in Q2-2018 was $835 per square-foot, an increase of 18 per cent year-over-year, but down from the high of $954 per square-foot for units launched in Q4-2017.
Unsold inventory in development increased to 9,341 units, the highest it has been in six quarters, but remained well below the 10-year average of 15,087 units. Pre-construction buyers have become more cautious as new condo prices began their sharp climb last year, as price appreciation slowed for resale units.
Condo apartment resale volume dropped 17 per cent year-over-year in Q2-2018, but this figure was an improvement compared to the 31 per cent decline recorded in Q1. In Q2, there were 6,019 units resold, which is five per cent higher than the 10-year average for Q2 (5,708 units).
Annual resale price growth of five per cent in Q2 represented a strong deceleration compared to the 30 per cent annual growth recorded in Q2-2017. Continued positive resale price growth has been supported by low levels of supply, as total listings have fallen on an annual basis for the last 10 consecutive quarters.