The GTA Condo Market Report Q2-2022 finds that the condo market performed relatively well above the ten year-average but fell 21% from the previous year. What could this mean for future investors and first-time home buyers?
Urbanation released its quarterly Q2-2022 GTA Condominium Market Report, and it is quite telling of the pre-construction condo market. The research in their reports comes from surveying approximately 100 of the region's developers, brokerages and lenders. In their findings, one of the key takeaways is that the GTA's new condominium sales slowed in Q2 as interest rates rose.
Let's have a look at this quarter's market highlights and what they mean for investors and potential buyers.
It's no secret that Ontario has been dealing with an affordability and housing shortage. This seems to have significantly affected condo sales on a quarterly and yearly basis, but looking over the decade, it's a different story.
This Q2 saw a 21% decrease in sales compared to last year and a 35% increase in unsold new condo inventory from an 18-quarter low in Q1-2022. This means sales fell well short of the 9,924 new launches during the quarter, the third highest volume on record. However, if you look at the 10-year average, the Q2 unsold new condo inventory level was down 20% and 6% compared to last year. These numbers indicate that the market is still hot, and investing in a condo will allow investors to see long-term appreciation.
Among new units launched for presale during Q2-2022, sold prices averaged $1,344 psf, up slightly from the Q1-2022 average of $1,340 psf. Plus, prices for unsold new condos grew 19% annually to a record high of $1,443 psf due to low supply, fast-rising construction costs, and an increase in inventory at higher-priced projects.
What are the higher-priced projects, you may ask? One of the most expensive projects was FORMA Condos by Frank Gehry, which sold over 400 units at over $1,900 psf. Excluding FORMA, the average sold price for Q2 launches was reduced to $1,300 psf — 3% below Q1 but still 17% higher than new launches sold a year ago in Q2-2021 at an average of $1,109 psf. New condo launches were up this quarter with 35 new project openings, compared to Q2-2021, which saw 32 new launches.
Compared to record highs in recent quarters, this Q2 saw fewer starts, falling from 290 in Q1-2021 to 284. Compared to last quarter, total units under construction decreased from 88,354 to 87,838.
Taking a look at the resale market, this report indicates that activity declined 35% year-over-year in Q2, pulling prices down 4.9% quarter-over-quarter to an average of $940 psf. In Q2-2021 quarter sales sat at 7,791, whereas this year's Q2 quarter sales fell to 5,076. However, compared to a year ago, average resale prices were up 9.3% from $707,000 to $794,000.
As expected, prices were higher in the City of Toronto, at $795,560, however, a significant price increase was also seen in nearby suburbs. At $673,051, Peel Region posted an 18.7% price increase, while Durham Region saw prices jump 25.5% to $645,327. This indicates that although Toronto continues to attract buyers, the GTA is also feeling the heat of the market as buyers span out to surrounding areas.
Message for Investors
The GTA’s condo market is seeing unprecedented numbers caused by inflation and interest rates. We are seeing historically low sales compared to the robust market seen in 2021, especially during the second half of the year (Q3 and Q4), when a record-breaking 16,548 units were sold. The 30,825 total units sold in 2021 exceeded the 10-year average by 43%, with the 8,342 units sold in Q4-2021 also rising 43% above the 10-year average. Relatively speaking the market seems to be showing low numbers when compared to last year's sales.
Urbanation’s Q2-2022 Condo Market Report explains that “Activity is likely to remain slow in the near term as presale buyers continue to act cautiously and developers delay new openings. Higher interest rates, increasing completions and more investor selling will likely hold price appreciation below its historic average. However, the strength in the rental market and shift in demand towards more affordable ownership options will help support condominium activity, with long-term growth continuing to be driven by increasing demographic demand relative to constrained levels of housing supply.”
As an investor, it is important to keep up to date with the market trends, not just quarterly, or yearly but also decennially. This quarter's market shows us that factors such as inflation and interest hikes have helped cool the market, which could lead to falling home prices. If the price of homes were to drop, homes would be more affordable, allowing potential investors and first-time homebuyers to get their foot in the door. At the same time, investors that have already purchased can rest assured that their investments will see long-term appreciation. After all, purchasing a condo is one of the safest long-term investments you can make.
Stay tuned for our Q3-2022 report, where we'll highlight all the changes in the market. To learn more about how you can benefit from the pre-construction condo market, sign up for our Online Condo Investment Presentation today.