Photo: James Bombales
Condos are the entryway to property ownership for many in the pricey Toronto housing market — but sales of new units are crumbling with prices now higher than a growing number of would-be buyers can afford to pay for a starter home.
A total of 772 condo units, including homes in low-, mid- and hi-rise buildings as well as townhouses and lofts, sold across the GTA this February, down a whopping 58 percent from a year before and 51 percent off the 10-year average.
Most of these sales took place in Toronto proper, where buyers snapped up 533 units, well short of the 1,065 that sold the previous February.
This is all according to the most recent numbers from real estate data firm Altus Group, who provide monthly updates for industry lobbyists, the Building Industry and Land Development Association (BILD).
“Softer new condominium apartment sales in February can, at least in part, be attributed to the rapid increase in prices in the past two years, which has priced many would-be buyers out of the market,” explains Patricia Arsenault, executive vice president of data solutions at Altus Group, in BILD’s latest market report news release.
In February, the benchmark asking price of a new condo was $792,709, an increase of 8.6 percent from the same month in 2018. That’s above what homebuyers are paying on average for units on the resale market, which has seen a similar rate of price growth and a slowdown in sales. According to the Toronto Real Estate Board, the average sale price of a condo last month was $552,161, up 6.1 percent annually. Meantime, resale transactions fell 5.7 percent on a year-over-year basis.
According to one RBC study, a typical Toronto household would have needed to dedicate nearly half its income to afford the average condo in the GTA last quarter. The big bank’s calculations assume a 25-percent downpayment on a 25-year mortgage with a five-year fixed rate and include monthly payments, property taxes and utilities.
But there may be factors other than pricing contributing to the sluggish pace of new condo sales, suggests David Wilkes, BILD’s president and CEO. “I think there’s a number of things that were going on. Obviously, weather plays a role,” he tells Livabl. “We’re at a period of economic uncertainty,” he adds, noting the recently released federal budget and how last year policymakers introduced stress testing for uninsured mortgages. The federal move created a higher barrier to home ownership as it requires uninsured-mortgage applicants to qualify for their loans at an interest rate that is 2 percentage points higher than what their lenders are offering.
Wilkes is hoping the national stress-test policy is changed, and that the Ontario and municipal governments work to speed up the development-approvals process and unlock more land for residential construction. “There’s a number of things that can be done,” says Wilkes, who remains “bullish” on the new-housing market over the long-term based on strong population growth projections.
The GTA’s population is forecast to swell to 9.7 million by 2041, according to the Ontario Ministry of Finance. As per 2016 census data, the most recently available numbers, the region is home to 6.4 million.
As some potential buyers have been either pushed out of the market or are waiting on the sidelines, the supply of new condos has been increasing. At the end of February, 11,269 new condo units were available for purchase. That number has grown since January, when there were 10,364 new condos on the market in the GTA. Altus Group’s Arsenault suggests homebuyers will benefit from this buildup of supply.
“The good news is that, although still relatively low in historical terms, there is now more inventory available to purchase and this is curbing upward pressure on prices,” Arsenault says.
