There was a time when the Greater Toronto Area’s (GTA) new condo market was catering to first-time buyers. And it wasn’t as long ago as you might think. Today, first-time buyers are few and far between, and it doesn’t look like things are going to change at any time soon.
The last time in recent memory that new condo marketing was targeting first-time buyers was back in 2014. The late Barry Lyon, a respected development consultant, called 2014 the “year of incentives,” saying, “Developers will be trying to win over markets they’ve been ignoring for the past several years, particularly first-time buyers and the end-user market.”
He was right. Developers launched all sorts of incentives and programs to help first-time buyers get into the market. It was partially because people were saying the condo boom was over; sales and prices were supposed to level off. Lyon predicted that there would be 12,000 to 15,000 new condo sales in 2014. There ended up being 22,176 new condo sales, according to the Building Industry and Land Development Association (BILD).
We’re pointing this out to demonstrate the conditions the market needs to be in for first-time buyers to stand a chance at finding a place to call home in the GTA. Going into 2014, the industry believed there would be 15,000 new condo sales if they were lucky, so measures were taken to get first-time buyers into the presentation centres.
At the moment, we’re faced with the opposite environment; Ben Myers, Senior VP, Market Research & Analytics, Fortress Real Developments, says that there were 29,186 new condo sales in the GTA in 2016, topping the record set in 2011. In the first five months of 2017, there have been 17,200 new condo sales, which is 58% faster than the pace of growth in 2016.
That means the GTA’s new condo market is on pace to set another record high for the year. These are not the best conditions for first-time buyers. In fall 2016, the Toronto Real Estate Board (TREB) conducted a survey and found that 53% of would-be buyers were first-timers. In a more recent TREB consumer survey, the results of which were released earlier this month, they found that first-time buyers only accounted for 40% of potential purchasers.
Clearly, first-time buyers are growing less confident in their ability to enter the market. Even if the market does cool off in the second half of 2017, there’s a good chance it will take a few years before more first-time buyers can seriously start shopping around.
All this said, the factors to take into consideration for one first-time buyer to the next can vary dramatically. If you’re a single person making $31,000 a year, then yes, you may have a difficult time saving up to buy your first condo in downtown Toronto. Perhaps a person with this same salary is getting financial assistance from family and they have a cosigner for their mortgage.
Then there are couples who have dual income and are likely looking at one-bedrooms, just like the first-timer mentioned above. Two incomes equals more buying power. And not all first-time buyers are young; there could be more mature, established adults that have been renting for a long time and now feel like they want to buy.
We can’t speak for every first-time buyer in the GTA, but as new condo sales are on pace to hit a record high, along with the average price (now exceeds $600,000), we can’t help but think that first-time buyers are getting left behind.
In 2014, it was the predicted decrease in sales that spurred a shift in the industry’s marketing efforts. Perhaps the lack of affordability in the new condo market will also spur some more innovative programs for first-time buyers.