Though the Toronto Real Estate Board (TREB) just announced a drop in condo sales in the resale market in the second quarter, the new condo market is still hot.
There were 6,046 new home sales last month, 91% of which were new condo units. In March 2017, new condo sales hit a record high, and June 2017 just broke that record with 5,495 sales. Compared to May 2017, this is a 59% increase in new condo sales.
“We continue to see that the Province’s Fair Housing Plan in effect since April has had little impact on the new home market,” says BILD President and CEO Bryan Tuckey. “Unlike the resale market which experienced a slowdown last month, the numbers reflected in the new homes market are quite different. Prices continue to rise and supply continues to be low. Three out of four of the new homes purchased in the GTA so far this year have been condo apartments. With condo prices continuing to escalate, this segment of the market is becoming out of reach for many consumers.”
May to June, the average price of a new condo unit in the GTA went up $22,000 to $627,000, which is a 34% jump year-over-year. The average size was 845 square feet and the average price per square foot was $742. A year ago, the average per square foot was $587.
“The record number of condominium apartment sales in June was the result of a ‘perfect storm’ of factors,” says Patricia Arsenault, Altus Group’s Executive Vice-President of Research Consulting Services. “These factors include: the sizeable number of units in new condo projects opened in May and June (over 8,500); demand from end-user buyers who might have preferred a single-family home but have adjusted their expectations due to lack of affordable supply; and heightened investor interest due to the rapid price increases for condo apartments in recent months.”
It’s somewhat troubling that Tuckey says the new condo market is becoming out of reach for buyers and Arsenault says that consumers are turning to this market segment as a more affordable option.
That said, let’s take a look at the new low-rise market. There were just 551 new low-rise sales in June 2017, which is a 72% decrease and 64% off the 10-year average. The average price of a new low-rise home was $1,250,262 last month, a 40% increase year-over-year. While the price of semis and townhomes continue to rise, hitting $943,115 and $1,091,151 respectively, the average price of a new detached home fell 9% to $1,761,985.
How low is supply exactly? It fell nearly 20% last month to just 8,661 units. To put that in perspective, a decade ago there were 30,300 new homes available across the GTA.
“The ongoing drop in new housing inventory demonstrates how hard it is for the industry to bring new homes to the market,” Tuckey says. “The challenges builders face including lack of serviced and permit ready developable land and out of date zoning bylaws continue to impact the supply of housing. It’s time for governments to work with the industry in order to help bring supply in builder inventories to a healthy level.”
Overall, new home sales went up 23% compared to June 2016, with 28,889 sales year-to-date. Compared to the same period in 2016, this is a 14% increase and about 44% above the 10-year average.
Clearly, the new home market isn’t experiencing the same slowdown as the resale market. As we approach the typically busy fall season, we’re interested to see how the industry and homebuyers move forward.