However, with affordable single-family homes largely non-existent throughout the area, more Toronto residents are turning to condos. Therefore, while the overall market may cool a bit in the years to come, it’s safe to say that the Toronto condo market will continue to thrive.
The average condo selling price was $393,589 in Q1 on 2016. This was an increase of 8% compared to Q1 2015, and is a far cry from the astronomical single-family home increases we’ve seen in Vancouver and Toronto.
Couple this with CMHC’s recent statement that the Toronto condo market is not overbuilt, and we have ourselves a pretty good indication that there’s no Toronto condo bubble.
To come up with accurate Toronto condo market predictions, we must consider the current situation regarding available inventory of units throughout the area. According to Royal Bank Canada, a glut of new condos may join existing, unsold ones to create problems down the road.
In the first quarter of 2016, there were about six condo units under construction around the country for every 1,000 people. Anything above 4.5 can be problematic.
So far, the booming real estate market has been able to absorb the addition of so many new condos, which have mostly been built in the GTA. Indeed, condos account for about one-third of all new construction in the region. RBC is concerned that if too many new condos flood the market at once, the overall real estate market may be negatively affected.
While the possibility of a glut of new, unsold condos could occur, it’s important to remember that the number of unsold, finished condos dropped from a 22-year high of 0.58 units per 1,000 in May 2015 to 0.28 units in April 2016. Therefore, we believe that a true glut is unlikely to occur in 2017.
Balancing out the supposed glut of new condos in the GTA is the ever-increasing demand for larger condos. Indeed, with many buyers being priced out of even modest single-family homes and low-rise real estate, many are turning their attention to larger condos.
In the second quarter of 2016, the share of two and three-bedroom condos increased to 44 percent, versus 35 percent in 2015, and 27 percent five years ago. While three-bedroom condos only account for 3 percent of the market, two-bedrooms with dens now account for 29 percent. Meanwhile, one-bedroom condos’ share dropped to 25 percent this year from 30 percent five years ago.
Demand for larger condos will likely continue well into 2017. However, with a potential glut of condos hitting the market and plenty of unsold ones out there, supply and demand should equalize to some extent. This means that prices are likely to flatten for a bit. In 2017, then, we are unlikely to see major price spikes for condos in most of the GTA.
The downtown core area, however, is likely to continue to see price increases throughout next year.
These Toronto condo market predictions are contingent on the Canada dollar remaining where it is, interest rates remaining low, and continued activity by foreign investors.
Standby for more on this.
Ryan Coyle, Co-Founder CONNECT Asset Management