Downtown Toronto Condo Market Recovers in Q1: Report

Toronto Condo Market Report

Don't call it a comeback - the Toronto condo market has been a contender for years. While it’s true that Toronto's downtown condo market experienced months of sluggish sales, it’s bouncing right back in the first quarter of 2021. 

According to Urbanation’s latest Q1-2021 Condo Market Survey, there were nearly 3,000 (2,886) condo units sold in Q1-2021 in the former City of Toronto was actually 2.5 times higher than quarterly averages recorded between Q2 and Q4 of 2020, as well as higher than pre-pandemic levels of 2,829 sales seen in Q1-2020.

Quarterly New Condo Sales & Unsold Price PSF

What’s causing this recovery? Well, ultra-low interest rates have made the cost of borrowing not only affordable but highly attractive. In addition, there is a sense of “normality” in the air as more people are getting vaccinated, which is bringing in a lot of optimism into the market. 

“The downtown Toronto condo market turned the corner in the first quarter of the year on low borrowing costs and renewed optimism regarding the outlook, but also partly due to chain reaction after suburban home prices soared 30% over the past year and put the spotlight back on urban properties,” said Shaun Hildebrand, President of Urbanation.

There is also a feeling of renewed hope that Toronto will once again open businesses, restaurants, entertainment venues and shops that have all been the highlight of those who enjoy living in Toronto’s core. The suburban hype may also be fading as people begin to realize that the low-rise housing boom has only made real estate unaffordable even in areas outside the GTA.

Let’s examine some of the key highlights from Urbanation’s latest condo market report:

Quarterly Sales

New GTA condo sales reached 5,385 units during the first quarter of 2021, which was in close range of pre-pandemic sales levels, coming within close range (-4%) of pre-pandemic sales of 5,593 units in Q1-2020 and exceeding the 10-year average of 4,924 sales.

Interestingly, the theme for 2020 was the 905 region taking dominance of the market, but we are now seeing this shift back in the first quarter of 2021 to downtown Toronto. This comeback shouldn’t really come as a surprise because there simply is not enough land in the Toronto core, and this is fuelling the demand for those who want to be at the heart of Canada’s economic hub.

GTA New Condo Apt Sales Q1 2021
Source: Urbanation

New Condo Launches

In terms of new condo launches, there was a 76% share of new launches absorbed in Q1 2021, which is the highest absorption levels seen since 2017 at a record average sales price of $1,261 PSF. This growth was driven by several successful new openings in the downtown Toronto core that sold for an average of $1,419 PSF and with an average condo apartment size priced at $856,000 of 603 square feet. This comes in at 5.7% higher than the average back in Q1-2020 that saw an average of $1,371 PSF, and with an average price of $814,000 for 594 square feet. Average pricing for downtown Toronto projects in Q1 saw sales between $1,260 and $1,470 PSF, compared to a much more varied pricing scale seen in the 905, which saw pricing starting from $737 PSF in Clarington to $1,214 PSF in Mississauga’s Port Credit neighbourhood.

New Condo Absorption Unsold Inventory- Q1 2021

Unsold Inventory

In terms of unsold inventory, there was a decline across the GTA of 11% year-over-year to a 10-quarter low of 11,956 units. Unsold inventory was also down about 19% below the 10-year first quarter average of 14,729 units.

Average prices for unsold units did, however, increase 8% from a year ago to a record high of $1,178 PSF.

As a drop in inventory occurred, it was interesting to see condo developers quickly raise prices by the end of the first quarter of 2021 by an average of $45 PSF and even up to over $100 PSF by some builders, compared to the end of the fourth quarter in 2020.

New Condo Unsold Inventory- Q1 2021

New Condo Project Openings

New condo launches in Q1 2021 were lower year-over-year with only 12 project openings - bringing in a total of 3,350 units. But, despite the drop in supply, Q1 2021 had higher absorption rates at 76%, which is up from Q1-2020’s 71% absorption rate.

Resale Market

Now when it comes to the resale market, what we saw in Q1 2021 were condo apartment sales moving up 74% annually to a quarterly peak of 8,361 units, which helped bring down resale inventory to about 1 month of supply.

We also saw resale prices increase 8.3% on a quarterly basis to $825 PSF, which is about 4% higher than the pre-pandemic average in Q1-2020 of $793 PSF.

Year over Year Change Average Price

New Projects Under Construction

In terms of new projects under construction, the first three months of 2021 saw construction begin to gain momentum with 4,414 construction starts, which has raised the total under-construction inventory to a record of 83,497 new condo units. This is up about 10% from 76,145 units seen in Q1-2020.

But, when we look at the former City of Toronto, we can see that this region had a record low share of construction activity in the first quarter of 2021 at only 44% (36,997 units), while the 905 region saw a record peak of 32% (19,497 units).

Regional Distribution of Condo Apt Under Construction

Condo investors across the GTA should see optimism from Urbanation’s latest report because it shows that while the low-rise segment has seen a massive uptick in year-over-year pricing, the high-rise segment has not seen the same price appreciation.

While a lot of the attention was in the 905 region in the previous quarter, we are now seeing this shift in momentum back into the 416 region once again. This should not come as a surprise because while there is a limited supply, Toronto has the economic factor on its side that is bringing in record job and population growth for decades to come.

The first quarter of 2021 presents a prime opportunity for investors to purchase new condos across the GTA at relatively fair pricing, especially when compared to the low-rise market.