Urbanation, the authority on condo market intelligence in the Greater Toronto Area, released its market results for the second quarter of 2018, reporting a drop in sales as developers respond to the buyer slowdown.
In 2017, pre-sales hit a record high, so it’s not surprising the total number of condo units under construction in Q-2018 hit a high of 63,904 (95% of which were pre-sold). Construction starts also hit a record high last quarter, reaching 7,981.
5,759 new condo units came to market in Q2-2018, and 56% were sold by the end of the quarter. Compare this to the same period last year when 9,521 units hit the market and 80% pre-sold. Clearly the new condo market is moderating. Unsold inventory in development jumped to 9,341 units, the highest in six quarters, but lower than the 10-year average of 15,807.
“The slowdown in new condo activity this year was fully anticipated following the record-breaking pace of activity last year,” reads the report release. “First half 2018 sales of 9,058 units were down 58% from 2017 (21,316) and 13% below the 10-year first half average of 10,471 sales.”
The average opening price in Q2-2018 was $835 per square foot, an 18% year-over-year increase, but down from the high of $954 per square foot in Q4-2017.
With skyrocketing prices in 2017, some buyers have been hesitant to get into the new condo market, plus resale prices have calmed down. As a result, developers are holding back on new launches. Compared to the same quarter last year, there were 51% fewer site openings.
“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,” says Shaun Hildebrand, President of Urbanation. “Ultimately, low unsold inventory and a stabilizing resale market will provide support for the new condo market in the second half of 2018.”
There were 6,019 condo transactions in the resale market in Q2-2018, which is 5% higher than the average for the quarter. Annual resale price growth came in at 5%, which is a significant slowdown from the 30% growth recorded in Q2-2017. Low supply is supporting price growth; for the last 10 consecutive quarters listings have dropped year-over-year.
As Urbanation points out, it makes sense that new condo sales and prices are easing up a bit after a year of record highs. As single-family home prices drop, condo units are still the most affordable option in the GTA, so demand is still there! We can’t wait to see what the second half of the year holds for the new condo market.