Land for high-rise condominium development was a major component of $23.5 billion in investment property sales in the Greater Toronto Area last year. Altus Group’s newly released overview of 2017 market activity also points to record sales volumes and surging prices of newly built units, creating some condo supply and affordability constraints for 2018.
More than 36,400 new condos were purchased in the GTA last year, up from 29,100 in 2016. Nearly 22,000 of those sales occurred in Toronto, but Peel and York regions both registered a more than 60 per cent jump in sales volumes from the previous year. Based on the historic pace of sales, Altus analysts calculate there is about a three month inventory of available new units as 2018 begins, but that at least a nine-month supply is needed to meet demand.
The average asking price for available new units had soared to $716,000 as of December 2017, a 41 per cent increase from year-end 2016. “While many end-user buyers have been looking to the condominium apartment sector for more affordable new product, some are now starting to be priced out of this segment as well,” the Altus GTA Flash Report observes.
In addition to end-user buyers, who are either choosing to live in condos or settling on them when priced out of the single-family home market, small investors are identified as a key group of purchasers “who have become the de facto providers of new housing supply in the GTA”. Facilitating those small investors are the developers who purchased $8.5 billion worth of residential land last year — a $2.8 billion or 49 per cent increase in value from the previous year.
Land zoned for high-density development, primarily in Toronto, represented a $3.1 billion chunk of that total. Altus highlights two notable deals: Great Gulf’s $300-million acquisition of three parcels on King Street West; and Cresford’s $268.5-million deal for five adjoining parcels in Yorkville. Both are higher values than those garnered for the year’s top retail, hotel or industrial deals.
The 905 regions saw the greatest share of sales of land to accommodate single-family housing, including more than $1 billion worth in York region alone. The so-called missing middle may also become more evident soon following $1.6 billion in sales of land zoned to accommodate medium density townhouse and low-rise housing, which was nearly double the 2016 sales value.
“This segment is being driven by a growing demand for more affordable ground-oriented housing product,” Altus analysts conclude. Single-family housing trends back that theory as the average asking price of new homes ticked above $1.2 million last year.
Renters are contemplating the rising costs of home ownership with caution and/or finding it more challenging to obtain adequate financing for a stake in the market. About one third of renters Altus surveyed are currently saving for a down payment, while 13 per cent said they planned to buy in 2018.
“Homebuying intentions remain strong in the GTA, despite the many roadblocks that have been put in potential buyers’ way due to factors such as price escalation in recent years, rising interest rates, tighter lending criteria and additional stress testing,” observes Matthew Boukall, senior director at Altus Group.
Housing preferences stratify somewhat by age cohort, with those under the age of 35 more likely to opt for a downtown location. A third of surveyed renters of condo units were younger than 35 and one quarter were one-person households. One in 10 renters of condo units had a landlord — either a company or an individual — located outside Canada, while 40 per cent were immigrants to Canada.
Sales values pushed up again in the rental housing sector last year, following a decline in 2016. Durham was the only part of the GTA where apartment sales volume declined from the previous year, but the region was the scene of just five per cent of the GTA’s total investment property trades in 2017.