The GTA’s Q4-2020 Condo Market Report

The GTA's Q4-2020 Condo Market Report

As the GTA’s new condo market experienced a lot of turbulence in 2020, it was also the first time that there were more pre-construction condos sold in the 905 area than Toronto.

Urbanation’s latest year-end Q4-2020 Condo Market Highlights revealed that new condo apartment sales declined 28% year-over-year across the GTA to 18,247 units, which was the lowest annual total since 2013 and 15% below the 10-year average of 21,421 units.

The 905 region’s sales growth of 9,228 units in 2020 represented the third best year on record, which was in big contrast to the 10-year low for new condo sales in the City of Toronto at 8,959 units.

But, despite this shift towards new condo sales in the 905 region, the overall mix of new units brought to market in 2020 were smaller. What we saw in 2020 was one bedroom and studio units occupying a 60% share of new launches in the GTA, which increased from the 53% share of new launches seen in 2019. 

The average condo unit size for new launches was 688 square feet in the GTA, compared to an average of 715 square feet seen in the previous year.

What’s interesting is that while sales were lower in Toronto than in the 905 region, the average condo unit size of new launches in Toronto actually increased from 676 square feet in 2019 to 706 square feet in 2020. Meanwhile, the 905 region saw a decline in the average condo unit size for new launches from 735 square feet in 2019 to 690 square feet in 2020.

Let’s examine some of the other key highlights from Urbanation’s Q4-2020 report that investors should consider as we enter the first half of 2021.

The GTA’s Q4-2020 Active Market

The average sold index price for new condos in the fourth quarter of 2020 reached $891 per square foot across the GTA, which led to annual price appreciation growth of 6% when compared to Q4-2019 ($844 PSF). 

In addition, the annual growth rate within the unsold index price was a moderate 5%, with the average unsold index price reaching $1,126 in Q4-2020 compared to $1,070 in Q4-2019.

The overall 10-year average appreciation rate for the sold and unsold index price was 7% and 8% respectively, whereas signs of slowing growth were seen in the City of Toronto with the annual price appreciation rate for the unsold index price declining to 2% year-over-year to $1,377 PSF.

Q4-2020 New Project Openings

In terms of new projects openings within the GTA, the number of new launches in Q4-2020 remained the same as the previous quarter in Q3-2020. However, what we did see was that a third of Q4-2020 new openings had less than 100 units, which brought the number of units down from the previous quarter of 5,503.

In addition to this decline in total units, the year-over-year rate of absorption also dropped for fourth quarter new openings from 68% in Q4-2019 to 55% in Q4-2020.

GTA Resale Market 2020 Q4

With respect to the resale market, there were a total of 5,668 resale transactions in Q4-2020, which was 15% higher than Q4-2019 (4,916 units). Resale volume was also 25% higher than the 10-year average of 4,547 units. The total 2020 resale volume reached 20,009 units, which was down 7% from 2019’s 21,443 units.

We also saw the average resale index price in the GTA fall for a third consecutive quarter to $762 PSF and the average end-selling price drop 0.5% year-over-year to $634,000.

This decline is more evident when also looking at Q3-2020 when the average resale price was $655,000, which showed a larger fourth quarter condo market softening for 2020.

2020-Q4 under construction Condos

Surprisingly, the ongoing COVID-19 pandemic did not slow down the GTA construction industry in 2020. What we saw last year were construction starts for new condos reaching their second highest levels on record at 26,841 units for the year, increasing 10% from 2019 (24,491). In addition, there were a total of 22,473 new condos that were completed, including 4,877 units in 21 buildings in Q4-2020. 

Overall completions increased 55% in 2020 compared to 14,468 in 2019. And by the end of 2020 we saw a record high of 81,029 total condo units under construction across the GTA.

“The GTA new condominium market recorded a respectable number of sales in 2020 as the industry pivoted to a virtual sales environment amid lockdowns caused by COVID-19. The shift in activity to the 905 region accelerated last year as demand for relatively affordable suburban sites intensified alongside the broader real estate market,” said Shaun Hildebrand, president of Urbanation.

In addition, there wasn’t much evidence of future supply chain slowdown in 2020 with 7,165 units in 25 buildings starting construction in the fourth quarter. This would be the third consecutive quarter that had over 7,000 plus starts overall.

Message For Investors

What this report highlights for investors is that in spite of challenges from lockdowns with the pandemic, the GTA condo market still performed quite well. And even though we witnessed condo rents falling at record levels towards 13% annually in Q4-2020, the resale market saw positive price growth at 3.4% during the final months of 2020. 

There is no denying that there are still challenges in the market, particularly with rental rates still struggling to maintain positive momentum. But, there is a lot of renewed optimism among investors that are taking advantage of price discounts as we enter the first quarter of 2021.

And when we look at the new condo market, we saw greater balance and a healthy number of sales in 2020 with 11,031 units sold during the second half of the year, which was above the 10-year average for second half sales of 10,491 units.

Finally, investors buying new condos should not be concerned about being cash flow negative as the time it takes for that unit to reach completion should see a market turnaround. Government initiatives to ensure mass vaccinations are key to providing a clearer picture of the condo market recovery for the GTA.