The first quarter of the 2022 condo market is a tale of low inventory, high demand, and soaring real estate prices. On the one hand, the condo market hit the ground running immediately after the clock struck 2022, yielding the highest sales of new condominiums for any Q1 recorded. Still, it was quickly overshadowed by overheated conditions last seen in 2016/2017.
Urbanation's recent Q1-2022 GTA Condominium Market Report provides valuable insights into the market's performance. The new findings, which collected responses from about 100 new condominium development industry representatives, reveal that new condominium demand has far exceeded supply during the past two quarters. Despite the strength in pre-construction demand, the level of construction activity in the GTA declined for the first time in two years (88,773 units in Q4-2021 to 86,766 units in Q1-2022).
Toronto, A Hot & Cold Condo Market
With 8,253 units sold in the Greater Toronto Area (GTA), new condominium sales reached their highest quarter on record, up 55% year-over-year and exceeding the 10-year average (5,154 sales) by 60%. A record-high 94% of units in development were pre-sold as of Q1-2022, pushing unsold inventory down 32% from a year ago to an 18-quarter low of 8,726 units.
Total sales exceeded the total number of units launched for presale by 4,417 units, resulting in a six-month dip of 34% for unsold inventory. The 3.1 months of supply on the market in Q1-2022 represented a record low for the GTA new condo market, which coincided with a 16% year-over-year increase in average unsold prices to a new high of $1,381 psf.
Also detailed in the report, is the market share for the last four quarters. New condos in Toronto fell to a record low of 29%, down from 45% five years ago and 52% a decade ago.
The biggest sales driver in Q1 was buyers taking advantage of the end-of-record low-interest rates in the resale market. In this market, the average price per square foot increased by 12.7% between the fourth quarter of 2021 and the first quarter of 2022 — the fastest three-month price increase on record. This sent average resale prices 19.5% higher than a year ago reaching $986 psf ($811,000 for 823 sf), which was 24% above the pre-pandemic average in Q1-2020. Like the new condo market, resale condo appreciation rose fastest outside the core, with 905 region prices increasing at twice the annual of Toronto (27.8% versus 13.7%) and the outer-416 following close behind with 21.6% annual price growth. With the average GTA resale price surpassing $800,000 in Q1-2022 for the first time, the outer 416 and 905 regions, averaging $766,000 and $761,000, respectively, drew buyers seeking relative value in the market.
Below are a few snapshots that will help investors put the Urbanation report in perspective to better understand the new condo market and what to expect in the near future.
Urbanation, a primary source for credible condominium market data analysis, reveals in its market report that while new condominium sales recorded their best Q1 on record with 8,253 units sold, unsold inventory dropped by about 32% year-over-year to 8,726 units.
Data for the total number of units under construction in Q1-2022 declined by 77% to 2,835 projects under construction compared to the previous year. This ist significant because it marks the first decline in projects under construction in two years.
Although there was a steep decline in new projects under construction in Q1-2022 compared to the previous year, there was a 16.8% increase in the average sold PSF for a new condominium in the GTA for Q1-2022 compared to Q1-2021. There was also a 15% increase in the average unsold PSF compared to Q1-2021. In addition, the 10-year average rate of appreciation for the Q1-2022 sold index price was 7% and 8%, respectively, for the average unsold index price, which saw a 9% annual increase in Q1 to $1,085 PSF.
In terms of new project openings, it was interesting to see that there was a double in the number of launches in Q1-2022 compared to Q1-2021, especially since the number of projects under construction saw an outstanding low. The first quarter of 2022 also had 6,070 units added to the market, with an absorption rate of 70% in a record low average of just two months.
It is essential to highlight here that similar to the Q1 and Q2 time periods during the recession in 2009; new launches are projected to become relatively obsolete over the next six months, which should help maintain high absorption levels and low inventories for the current time period.
Condo sales in the resale market dropped by 17% annually from last year's record high. Still, they remained 37% higher than the 10- year average, with prices increasing 19.5% annually to an average of $986 psf, which was 24% above the pre-pandemic average in Q1-2020. With average GTA resale prices surpassing $800,000 in Q1-2022 for the first time, buyers were focused on areas of the market offering relative value, such as the outer 416 and 905 regions averaging prices of $766,000 and $761,000, respectively.
Message For Investors
Overall, the Urbanation Market Report and Survey reveals that industry experts are "cautiously optimistic" concerning the GTA real estate market. It is expected that prices will remain steady for new condo project launches. It is also apparent that developers are responding to interest rate hikes as we move into the summer months, which is historically a slower season for sales in the pre-construction market. It is possible that interest rates could cool the market, but only time will tell. Stay tuned for our Q2 - 2022 report, where we'll highlight all the changes in the market.
There is no doubt that Canada's low housing supply and its aggressive immigration policy have created an opportune time for investors to secure condos in its top cities. If you would like to learn more about the new condo market, we conduct Online Condo Investment Seminars twice a week. Connect with us to reserve a seat.