As GTA new home prices skyrocket, price gap narrows between condos and single-family homes
|Toronto Star 02 Nov 2021 at 06:33|
The price of a new construction single-family home in the Toronto region has hit a new record with the benchmark soaring 33.5 per cent year over year to $1.57 million in Sept.
A declining supply of detached, semi-detached houses and town homes, in the face of “incredibly strong demand,” fuelled by low interest rates is pushing prices skyward, said David Wilkes, CEO of the Building Industry and Land Development Association (BILD), which represents home builders.
The benchmark price for a new condo rose 2 per cent annually in Sept. to $1.04 million but declined from Aug. when it was $1.07 million, according to BILD.
September saw the third highest number of condo sales (a category that also includes stacked town houses) for that month. The 2,488 units that sold was a decline from 2,754 last September but remained above the 10-year average.
The 1,073 single-family homes that sold in September was less than half of last year’s 2,349 and was 3 per cent below the 10-year average.
Wilkes said the numbers likely reflect the condo segment’s recovery from the pandemic when buyers flooded the market for single-family homes. But if the lack of single-family home supply pushes more buyers to condos, that could potentially boost those prices higher.
A third quarter report from Urbanation on Monday suggests that may already be happening.
The development tracking market research firm found new construction condo inventory fell 11 per cent year-over-year in that period — 16 per cent below the 10-year average.
In the third quarter, pre-construction condo prices rose about 10 per cent annually to a record of $1,231 per sq. ft., The increase was greater in the 905 where prices climbed 17 per cent year-over-year, crossing the $1,000 per sq. ft. mark for the first time. The average price in Toronto was up 7 per cent annually to $1,328 per sq. ft.
There have been more than 16,000 condos launched for pre-sale in the last six months in the GTA and more than 75 per cent have been pre-sold, said Urbanation president Shaun Hildebrand. That is happening, he said, “at increasingly higher prices to the point where there is really very little inventory across the GTA that is priced under $1,000 per square foot.”
Units are becoming more expensive on a per-square-foot basis — rising about $200 per sq. ft. during the pandemic — but they are also getting smaller, he said. The third-quarter average unit size was 655 sq. ft. and doesn’t vary much between the city and the suburbs, he said.
“If you look at the wholly completed inventory of condos in the GTA it’s about 40 per cent investor owned. But if you look at the new supply of condos being built, it’s historically been 50 (or) 60 per cent and now I would estimate it to be at least 70 per cent,” said Hildebrand, adding that is true of the city and the suburbs.
This year’s third quarter was the fourth in the last five in which the 905 municipalities accounted for the majority of new construction condo sales.
“Now higher interest rates are coming into view, it will be important to see if we maybe get a pullback in demand especially now prices are high almost everywhere. We know cash flow is and certainly is going to be an issue for investors,” said Hildebrand.
The Toronto Regional Real Estate Board reported on Friday that re-sale condos are back to being a sellers’ market. Selling prices were up 9 per cent to $689,831 on average in the third quarter as listings plunged 31 per cent.