Condo Market Strong, Inventory Remains Low
The Greater Toronto Area’s condo market saw record quarterly sales as inventory plummeted in the first quarter, some of it clearly linked to investors looking to profit from units quickly.
Urbanation Inc., a condo research firm, said Wednesday there were 9,932 new condo apartments sales across the the GTA over the first 90 days of 2017, a 73 per cent jump from a year ago.
The average price of newly launched unit in the first quarter was $733 per square foot in the City of Toronto and $608 per square foot in the 905 region. The GTA average of $694 per square foot was up five per cent from the fourth quarter. Remaining unsold inventory at the end of the quarter was $719 per square foot, a 20 per cent increase from a year ago.
“Following the recent strength in condo price appreciation, (there was) an increase in resale activity within newly completed buildings as well as more units transacting twice within shorter timeframes,” the company said in its release, pointing to the speculation.
Within new projects completed and registered over the past two years, there were 1,059 sales in the first quarter representing 17 per cent total of total resales during the period. That percentage of homes sold within two years jumped 69 per cent from the first quarter a year ago.
Urbanation said there were 249 resale units sold in first quarter of 2017 that were sold for the second time within the past 12 months, a 53 per cent increase over the equivalent statistic for a year earlier.
“The shortening of holding periods for some condo buyers is an outcome of the rapidly accelerating market”, said Shaun Hildebrand, senior vice-president of Urbanation. “Although the share of short-term condo market participants still appears relatively low, it will be important to monitor the situation closely going forward as market conditions evolve.”
The Toronto Real Estate Board released its own data Wednesday that shows the condo sector picking up steam. April sales rose 7.7 per cent from a year ago — the only subcategory to see a rise in year over year sales — while new listings were relatively flat, creating an imbalance that drove the average existing condo home to $541,392, a 32 per cent increase from a year ago.
Some of the activity can clearly be traced to consumers being priced out of the detached home market where the average price of an existing home is now $1.2 million and a new home $1.78 million.
“The surge in condo price growth is fairly recent while detached prices have been growing rapidly for some time – they are bound to cool first. Typically when a market begins to moderate, it happens at the top end first as more discretionary purchases are put on hold,” said Hildebrand.
His firm says inventory levels in the condo sector are now dropping. There were 6,293 new units launched for pre-sale in in the first quarter compared to 3,061 units a year ago but even with that supply the inventory of unsold condos in development dropped by 61 per cent.
One potential obstacle for “flippers” in the coming months could be changes in provincial rules designed to catch people assigning property before a deal even closes.
The provincial government has created new rules around the land transfer tax which requires full disclosure on whether a property has been flipped or assigned before it closes. It plans to share that information with the Canada Revenue Agency, forcing people flipping property to pay taxes — something many speculate they have not been doing.
“There are speculators who enter into agreements to purchase property with no intention of buying them or living them, crowding out families who want to buy their own home,” said Charles Sousa, Ontario’s finance minister, when he announced the change last month.
Hildebrand says it’s still unclear what impact those changes might have on the market. “Anecdotally we are also hearing about more assignment sales occurring for new condos, which is also believed to be a fairly small part of the market,” he said. “If investors lose the option of assigning their units, it would likely have some impact on purchases.”
Source: Garry Marr With The Financial Post