The Q2-2019 report is in! Urbanation, the authoritative source for information on the GTA’s real estate market, just released their quarterly report with some surprising (and some not-so-surprising) headlines. Investors will be happy to hear that the Toronto area continues to perform very well, citing some near record-breaking sales in the GTA and surrounding regions–with prices, that were previously anticipated to level off–continuing to rise.
Read on to learn more about the near-record breaking sales this Q2 in the Toronto region, and downtown Toronto prices continuing to rise downtown in both resale and pre-construction, indicating that Toronto is steadily becoming more and more of a seller’s market. This is all despite a record number of units under construction… showing that the demand for homes downtown is showing no signs of slowing down.
New condominium and apartment sales in the Greater Toronto Area reached their second highest sales-per-quarter, just behind the absolutely unprecedented 11,413 units sold in Q2-2017.
This sales activity was driven by a number of factors that are maintaining a very strong demand for new homes in the downtown Toronto housing market, included but not limited to:
– A return to record-low borrowing costs
– Record-high population inflows
– A healthy job market and tight conditions in the resale market
– A huge shift in demand to relatively low-cost projects.
Sales surged 77% year-over-year to 8,902 units from the same period last year, supported by a large supply of units coming onto the market. A total of 10,848 new units launched for pre-sale during this quarter and rental listings shot to a high of 11,167 units (up 21% from a year ago).
This is an obvious indicator that downtown Toronto continues to steadily become more and more of a sellers market. Investors should rest easy knowing that sales show no signs of slowing down just yet.
While the Greater Toronto Area’s sales numbers are up overall, this is driven primarily by activity outside of the downtown core where sales have doubled from last year! The strongest segment of the market was better-located projects in the outer 416 and 905 areas – especially near public transit options.
This activity has been driven by a return to record-low borrowing costs, record-high population inflows, a healthy job market and tight conditions in the resale market, but also a huge shift in demand to relatively low-cost projects.
Hamilton-Grimsby in particular marked their strongest quarter with 574 sales (280% higher than Q2-2018’s 151 sales) since Urbanation began tracking the area.
Alternatively, sales in the downtown core have dropped 12%, driven by a number of factors including high land and development costs, more consideration being given to purpose-built rentals in the downtown area, and some investor fatigue for high-prices units.
We see prices continue to increase on both the sale of new condominiums and on resale housing in the Downtown Core.
New housing prices in the Toronto core are still increasing with the average price for all sold units in active projects increasing 10% year-over-year. This increase in price is linked to the very same reasons we saw sales soar this past quarter, including huge population inflows, healthy job market, and record low borrowing costs. And with mortgage rates in Canada hitting their lowest levels since July 2017, we can expect to see this trend continue.
Units launched in Q2 had an average sold price of $903 PSF, with remaining inventory hitting $1,000 PSF for the first time ever. Investors are happy to see strong average appreciation, with Toronto still performing well above the annual average benchmark of 5% appreciation per year.
The downtown resale market is also showing strong growth as the average resale price continues to rise. The average resale price reached a new milestone this quarter, rising 4% year-over-year and surpassing $700 PSF. This lead to a 5% increase from Q2-2018 and 8% higher than the 10-year average.
Whether you’re selling a pre-construction, or an existing unit, you can expect a healthy return on your investment in the near future if these trends continue (and we certainly expect they will!).
Anyone who follows the CONNECT blog will know Toronto has the highest number of cranes in North America (more cranes than New York, LA and Chicago combined!).
That’s why it’s no surprise that Greater Toronto Area reached a new record for number of units under construction, with a large increase in units reaching completion. 18,703 new condominium units registered over the past 12 months, of which 29% were listed and rented, up from a 27% share a year prior.
Virtually every project launched for pre-sale in the second quarter has received planning approval, which greatly reduces the risk of cancellations which have been on the rise over the last couple years.
While this may raise some concerns around over-supply within the area, demand in Toronto is having no trouble keeping up. The growth of the population and job markets in Toronto is currently outpacing all other cities in Canada and the U.S! And as we’ve seen this quarter, sales continue to soar, even despite rising prices.
While rental rates continue to increase, more supply in the market helped provide some moderation and has slowed the rate to a 5.4% increase annually (which translates to an average monthly rent of $2,421 in the GTA). The average rent index for units leased in Q2-2019 rose 7.6% year-over-year to $3.38 PSF.
Specifically focusing on the Central Toronto market, annual condominium rent growth slowed to 3.8% in Q2-2019 to reach an average of $2,584 ($3.82 psf) per month. The vacancy rate rose to 1.5% in the second quarter, the highest since 2015 (when Urbanation began tracking the data). Rent increases eased to 7.6% from 10.3% last year, bringing the cost of an average-sized unit of 794 square feet to $2,475.
This obviously means better cashflow for homeowners renting out their units, helping offset the increase in prices investors are experiencing in the Toronto marketplace.
Have any questions?
If anything in this article piqued your interest, we would love to hear from you! If you have questions about what you’ve read and want to discuss how you can use this information to make better Real Estate investment choices, don’t hesitate to reach out!
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