The first quarter of the 2020 GTA condo market can be best described as a tale of two markets. On the one hand the condo market kicked off 2020 with similar overheated conditions seen in 2016-2017, but this was quickly overshadowed as the market was turned upside down by the Novel Coronavirus.
Urbanation’s recent Q1-2020 GTA Condominium Market Survey report provides useful insights into how the market performed. The new findings, which collected responses from about 100 new condominium development industry representatives, reveal that over half of projects planned for launch this spring are currently on hold until the fall of this year.
Condo Market Enters Q1 With Strength Prior to COVID-19
There is no denying that the first quarter of the GTA condo market started the year off with confidence. New condominium sales achieved their second best Q1 in history with a total of 5,626 units, representing an increase of 85% year-over-year and 16% higher than the 10-year average that brought the total four quarters just shy of 28,000 units. Also, condo developers launched 4,623 units in the first quarter, which was 2.5 times higher than last year’s 1,829 units. But then the world was confronted with the COVID-19 pandemic where the last two weeks of March witnessed a sharp decline as GTA condo sales dropped 21% year-over-year, while real estate prices softened 1.3% compared to the first half of March.
As these events unfolded, real estate experts began to try and understand what was happening with the market and how to function during the initial weeks of the lockdown that showed no signs of abating.
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, which is a primary source for credible condominium market data analysis, reveals in its market report that while new condominium sales recorded their second best Q1 on record with 5,626 units sold, unsold inventory dropped by about 1% year-over-year to 13,024 units.
Data for the total number of units under construction in Q1-2020 declined by 3.3% to 76,177 units compared to the previous quarter, which is somewhat significant because it marks the first quarterly decline in total units under construction since Q1-2017.
But, although there was a modest decline in new projects under construction in Q1-2020 compared to the previous quarter, there was actually an 11% increase in the average sold PSF for new condominium apartments in the GTA for Q1-2020 compared to Q1-2019 and a modest 2% increase in the average sold PSF compared to Q4-2019. In addition, the 10-year average rate of appreciation for the Q1-2020 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 were double the number of launches in Q1-2020 compared to Q1-2019. The first quarter of 2020 also had a total of 4,623 units that were added to the market with an absorption rate of 71%, which is up from a rate of 58% during Q1-2019 launches as well as the overall 10-year Q1 average of 58%. It is important 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.
In Q4-2019, it was projected that there would be 24 new project launches and a total of 7,197 units; however, it is clear that the impact of COVID-19 is real and has caused a slight revision with respect to previous forecasts. The new forecast for Q1-2020 shows 22 new projects and a total of 5,893 units. Current COVID-19 lockdown restrictions have put a damper on a typically busy second quarter for developers across the GTA, but it is expected that the strong response to early launches could resume virtually and continue from now until September 2020 to help fulfill the projected targets for new project launches.
With respect to the condo resale market, while the number of transactions increased 12% and average prices increased 16%, year-over-year sales actually dropped 21% during the last two weeks of March and prices also dropped 1.3% when compared to the first half of March. This is, of course, directly related to the economic shutdown within the province as a result of COVID-19.
However, when compared to Q1-2019, resale volume increased 12% in Q1-2020 with 4,801 sales, which is also 10% higher than the 10-year average of 4,355 resales. Also, the annual resale volume during the past year was 13% higher reaching 21,967 resale transactions when compared to the 10-year average of 19,979 resales.
That being said, the annual resale price index actually surged 16% year-over-year in Q1-2020, which brought the average resale price index to $793 PSF. The average selling price for Q1-2020 in the GTA ended strong with a 17% year-over-year increase reaching $675,000.
As a whole, the Urbanation Market Survey Report reveals that industry experts are “cautiously optimistic” with respect to 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 COVID-19 by offering investors incentives such as extended deposit payments, longer cooling off periods, and in some cases price protection guarantees.
This is certainly an opportune moment in history for investors to secure condos with developers who are offering the most incentives and competitive pricing. To learn more about new condo developments in Toronto connect with one of our platinum agents today.