Although the Greater Toronto Area is still in pandemic mode, the real estate market is continuing to outperform at an impressive rate.
In the latest GTA Q3-2020 Condo Market Survey report from Urbanation, data shows that condo sales across the GTA have hit record highs in Q3-2020.
In a surprising reveal, year-over-year sales for new condominium apartments increased 30% in Q3-2020 to 6,370 units, which was a record high for third quarter activity.
“The third quarter showed impressive demand for new condominiums in the GTA amidst the pandemic, with the suburban markets leading the way,” said Shaun Hildebrand, President of Urbanation.
And while sales in the City of Toronto actually declined 16% to 2,536 units, the 905-region was able to boost the GTA’s overall sales record in Q3 with sales surging 106% to 3,834 units.
Hildebrand emphasized that “This regional shift in activity is expected to continue as buyers gravitate to less expensive markets while the downtown area faces supply challenges in the near term.”
Here are some key highlights from Urbanation’s Q3-2020 report that are important for investors to consider during these uncertain times.
What we saw in Q3-2020 was that the average sold price for new condo apartments climbed to $884 PSF in the GTA, which is about a 9% increase compared to Q3-2019 ($813 PSF).
Similarly, the average unsold index price increased 7% year-over-year in Q3-2020 to $1,106 PSF, compared to $1,032 PSF in Q3-2019. The 10-year average appreciation rate for both the sold and unsold index prices for Q3-2020 were 7% and 8% respectively.
Strong demand in the latter part of the second quarter saw new project launches reach an impressive pace for the third quarter with 27 projects to market totalling 6,694 units. These new project openings for Q3-2020 were much higher than the 11 projects launched in Q3-2019 bringing a total of only 2,556 units, representing growth of 162%.
What’s also interesting is that a 74% share of the 6,694 new units launched in the third quarter were sold by the end of the quarter, which represents the highest absorption rate for new condo launches since Q4-2017.
Within the resale market there were a total of 6,405 resale transactions that took place in Q3-2020, representing a 9% year-over-year increase compared to 5,899 resales in Q3-2019.
The overall resale volume in Q3-2020 was 23% higher than the historical 10-year Q3 average of 5,210 units. However, the slower resale volume experienced in the previous quarter kept the annual resale volume over the past 12 months down 9% year-over-year at 19,257 units.
In terms of the annual resale price index, there was a drop from double-digit figures seen during the first half of 2020 to 8% in Q3-2020, as well as a slight 2% pullback in the average resale index price from Q2-2020 $774 PSF.
What’s interesting, however, is that while we saw the average condo unit size increase to 846 square feet in Q3-2020 from 811 square feet in the previous quarter, the average end-selling price for GTA condos also increased to $655,000. This increase in the average resale price represents an 8% rise compared to Q3-2019.
Construction starts continued at a strong pace in Q3 with 6,595 units in 25 buildings commencing construction. We also saw completions slightly ahead of starts in the quarter, while the number of units under construction remained near record highs at 78,156 units, compared to only 72,503 units in Q3-2019.
As a whole, completions for 2020 are projected to reach record levels with 6,816 units in 21 buildings starting occupancy in Q3-2020. This would bring the year-to-date total to 17,596 units, which is 22% higher than the total number of completions (14,468) in 2019.
In addition, Urbanation projects another 5,411 units scheduled for completion in Q4-2020, which would bring the total year-end completions to a record setting 23,007 units.
Furthermore, Urbanation also projects completions to remain high with 22,434 new condos scheduled for completion in 2021, with more than 70% of them being built within the City of Toronto.
Advice for Long-Term Investors
The third quarter has undoubtedly been turbulent for the Toronto real estate market due to the ongoing pandemic. Many investors are wondering how to navigate the current market softening within the condo sector.
It is important for long-term investors to consider market dynamics in the months ahead leading into 2021 by keeping a close eye on the job market and the overall economic recovery efforts in place by the Ontario government.
On the plus side, investors should get some relief from ongoing commitments by the federal government to increase immigration levels. While there may be market softening today, there will likely be a strong supply shortage that will result in continued price increases as the economy returns to some type of “new normal” in the near future.