As we forge ahead through the second quarter of the year, we're taking a look back at the Greater Toronto Area’s Q1 - 2019, the market’s response to new condominium products and the trends forecasted for Q2. With help from stats provided to us by real estate research firm, Urbanation, here are some facts that pre-construction condo investors need to know.
During the first quarter of 2019, new condominium sale activity declined to a 10-year low with just 3,073 units sold. According to the numbers we have collected from Urbanation's Q1/2019 Market Overview, this means that the Greater Toronto Area’s sales were down 26% year-over-year and falling to the lowest number of sales recorded since 2013.
- Sales activity were heavily impacted by only eight new projects launched for pre-sale in the first quarter totalling 1,829 units-- the lowest volume of new openings since 2009.
- Developers have acted cautiously in light of the quickly rising construction costs which likely faced further upward pressure in Q1 as the number of condos underway reached a record 71,378 units.
- 10,104 units launched over the past 6 months and only 60% sold at an average of $1,001 psf.
- Unsold inventory remained relatively low at 12,232 units which should continue to provide support for new condo prices in the next term and give way to more launch activity in Q2.
What Does This All Mean For Investors?
For those who invested in projects that launched within the past six months and absorption was less than 70%, you’re looking at longer build out times. Projects that have sold less than 70% will likely need more time to secure construction financing in order to apply for a building permit. On the bright side, investors will benefit from allowing more time for market appreciation to accumulate. This will provide better potential returns upon completion in several years.
Although condo sales in the GTA were off to a quiet start, construction, on the other hand, reached a new milestone with 5,553 units breaking ground in Q1. This means that with this year’s units combined with more than 27,000 units over the past 12 months, the number of new condos under construction surpassed 70,000 for the first time ever. So far, the GTA has 71,378 units under construction compared to 68,709 total units under construction a year ago.
The average sold price for new condos in the GTA was $779 psf at the beginning of the year. This psf amounted to a 2% increase from the fourth quarter of 2018 at $766 psf and a 10% rise over Q1-2018. Likewise, the ten-year average rate of annual appreciation for the sold index price in Q1-2019 was 7%.
A limited number of new project launches in the first quarter forced buyers to pick from existing condo project inventory. This resulted in unsold inventory falling to 12,232 units, an 8.8% decrease from Q4-2018. The total number of unsold units were also 39% higher than in the first quarter of 2018.
For the GTA, there were 8 new project launches which added 1,829 units to the market, the lowest number of units launched in a quarter since 2009. By comparing Q1-2019 to Q4-2018's 31 new project openings (8,987 units), new project openings dropped by 287.5%, however, the absorption rate remained strong according to Urbanation. Q1-2019's new launches had a 58% absorption rate, up from 52% in Q4-2018, while down from a 64% absorption rate in Q1-2018.
New launches are anticipated to surge across the GTA in the second quarter with the potential of 44 buildings featuring 13,699 unit added to the market. That’s 648.9% more units than we’ve seen so far this year. And now, in a shift away from downtown Toronto projects, the bulk of the expected units are in the 905 region. The industry is anticipating 27 potential openings offering 7,244 units. Almost every area in the GTA should see new project launches during the second quarter, led by a number of highly anticipated launches in the newly hot again Vaughan, Mississauga, Markham, Oshawa and Whitby areas. Despite the recent drop in new openings during Q1-2019, the high volume of launches from Q4-2018 and what could amount to over 10,000 units in Q2-2019, construction activity will continue to receive a boost throughout 2020. Take it from us, we’re already off to a busy start as Q2 kicked off with several massive projects brought to market.
The 4,277 resale transactions recorded in Q1-2019 was relatively unchanged from Q1-2018 at 4,297 sales-- which was just below the 10-year average of 4,305 resales. While there were 16 projects with 3,861 units registered in Q1-2019, up from 10 projects with 2,080 units in Q1-2018, the annual resale volume was 20,118 units, down 9% from a year ago. The average resale price of $683 psf represents a decline from the fourth quarter of 2018 at $691 psf as the annual rate of price growth moderated to 3%.
The Hamilton-Grimsby market saw a strong first quarter with 340 sales. This brought the 12-month sales volume in the market to its highest since Urbanation began tracking the region at 1,022 transactions. On the other hand, the region’s unsold inventory followed the same trend as the GTA’s market as it fell from the previous quarter, declining 13% to 585 units. Q1-2019 saw just two buildings totalling 164 units hit the market with the number of unsold units decreasing from Q1-2018 at 222 units. The average sold index price in Hamilton-Grimsby rose 3% year-over-year to $536 psf in Q1-2019, while the average unsold index price also increased 3% year-over-year to $570 psf.
On the resale market, Hamilton-Grimsby registered 164 units in the first quarter and of those units, there were 91 sales in Q1-2019. This shows a decline of 15% annually from Q1-2018 at 104 resales. As it stands, the average resale price in this neck-of-the-woods is $366 psf.
Want to learn more about the pre-construction condo market? Our skilled and professional agents are available for one-on-one consultations to further explain how these numbers can affect your investments. Connect with us today.