Condo construction in the Greater Toronto Area (GTA) reached a new high in Q1 2019 as pre-sale launch activity dropped to a 10-year low and condo price growth began to slow. This is according to Urbanization Inc.‘s recent market report, which signals stronger sales activity to come.
“A particularly slow period for new condo sales activity in early 2019 will give way to a busier second quarter as project launches increase and demand fundamentals in the GTA remain solid,” says Shaun Hildebrand, President of Urbanization. “However, it’s also important to recognize that the growth trajectory for condo prices is starting to change and slower rates of appreciation are emerging relative to the past few years.”
Pre-sale activity drops, condo construction climbs
A decade-low volume of new projects launched for pre-sale contributed to a slow start for condo sales in 2019. 3,073 new condo apartments were sold in GTA throughout the period, representing a 26% year-over-year reduction and the lowest sales level since 2013. Sales were also heavily impacted by only eight new projects (1,829 units) launched for pre-sale in the first quarter — the lowest volume of new openings since 2009.
Meanwhile, pre-sale launch activity leveled off in early 2019 thanks in part to the spike in new openings in 2017 which brought 32,077 units into the market. This spike pushed the total number of units under construction as of Q1-2019 to a record 71,378 units across 242 projects, up 61,555 units in Q1-2018.
“The increased pressure on new development in the GTA has led to quickly rising construction costs, causing developers to take a more careful approach towards launching new projects, particularly in light of the increased number of project cancellations,” the report states.
Condo price growth slowing
While condo pre-sale price climbed more than 50% between 2016 and 2018, activity in 2019 was a different story. The average sold index price within all actively marketed projects in Q1-2019 increased by 1.7% from Q4-2018 ($766 psf to $779 psf), which was considerably slower than the 2.9% quarter-over-quarter growth averaged during 2017 and 2018. Even still, the report indicates that the price index for all sold units in actively marketing projects still posted strong growth of 10% and unsold prices grew 9% (to $998 psf), while unsold price growth hit single-digits.
“Despite some early signs that new condo price growth could be starting to moderate, pricing trends for new condominiums continued to diverge from the resale market,” states Urbanization. “In Q1-2019, the average resale condominium price psf declined by 1.2% from Q4-2018 ($691 psf to $683 psf). While not a completely unordinary occurrence between Q4 and Q1 periods due to seasonal factors, it was the first time resale condo prices declined on a quarterly basis since Q1-2014.”
Nevertheless, the report indicates that low inventories will continue to support prices in the near-term.