New condo sales for Greater Toronto have already surpassed typical volumes for January, pushing 2020 sales off to a robust start. There is no contending that this exceptional start to the year is a direct result of a strong Q4-2019. According to Urbanation's Q4-2019 GTA Condominium Market Survey report, new condo sales grew 27%, the third-highest year on record, showing resilient strength in a time where the province has showcased stricter mortgage rules, rates and speculation taxes.
2018's mortgage stress-test shake-up slowed sales in the start of 2019, but as borrowers settled into the new normal, the year ended with Toronto's new house prices falling and condos making significant gains. Q4-2019 was almost as hot as Q4-2017 which was a monumental year for condominiums in the Greater Toronto Area's real estate history.
Here's Why Q4-2019 Was So Strong:
With commercial and new home sectors experiencing simultaneous growth since 2017, investment property sales volumes in these markets have been impressive. Not only have investors shown a renewed interest in the new condo market, but so have end-users, rebounding a whopping 47% overall.
If we take a look at the region's commercial real estate market in 2019, the sector was steady during the fourth quarter, as reported by the Altus Group. It saw total investment property sales in the GTA hit $22.6 billion for the year, which was the second-highest annual volume record in the past 10 years.
A surge in the purchase of commercial real estate is a reflection of the number of new startups and growing businesses in the GTA. Companies like Google and Uber have established new offices in the region, which comes with job growth and employees needing a place to live nearby. Commercial and residential real estate goes hand-in-hand, and as a result of commercial real estate growth, investors are once again flocking to the new condo market for income property opportunities.
Thanks to Urbanation's evaluation of the new condo market in the GTA, we are able to provide a breakdown of how the market performed in 2019 and projections for 2020.
Check out the numbers below:
Urbanation, a leader in condominium market data analysis, highlights in its market report that condo home sales activity surged in the fourth quarter of 2019 with a total of 8,044 units sold, representing an increase of 38% compared to the same period last year.
With a record of 78,112 condo units under construction, the market has seen a rise of 20,000 units over the past two years. There are approximately 29,500 units scheduled for completion this year (2020) which is set to double the level of completions of those set in 2018 and will far surpass the previous high set in 2014 at 21,000 units.
While new openings in the downtown Toronto market push the envelope at $1,300 per square foot, the average index sold price balanced out through strong sales in the 905 region, which accounted for 42% of annual sales in 2019, up from 31% in 2018. 905 projects have helped to slow average sold price growth to $835 per square foot from $813 in Q3-2019.
It is essential to keep in mind that while there was a rapid expansion of Toronto's new condominium market over the past three years, there was also a period of low completions. This low helped in the creation of tight market conditions and a quite favourable environment for new project launches. Sales activity in Q4-2019 was once again dominated by new project launches, which provides a good indicator of growth in demand from investors who tend to be the most prevalent buyers in this market. New project openings between Q3 and Q4 grew by 182%.
Looking ahead, Urbanation is estimating that there will be 24 new projects in Q1-2020 and 7,197 units. The level of condo completions will be an essential factor for the GTA market this year as it is estimated that condo unit completions are set to surge to a new high of approximately 30,000. However, a lower level of activity is predicted for this year as new launches ease while the market balances out this record number of completions.
Condo sales in the resale market dropped by 16% for units selling under $500,000 while sales grew 23% for units in the $500,000 to $699,000 price range. The most substantial growth when it comes to resale was 29% for units priced $700,000 to $999,000 range. Overall sales remained heavily concentrated under the $700,000 mark with an 81% share of transactions last year.
Altogether, Urbanation's market survey report reveals a trend for 2020. The report shows signs of further increased new condo prices across the GTA, where population growth, and strong demand (with modest supply), make this a very competitive, yet opportune year to consider entry into the pre-construction condo market.
If you would like to learn more about the new condo market, we're conducting investor presentations at our office. Connect with us here to find out how you can attend.