This article was printed on March 14th in the Toronto Sun. It is reprinted here with permission.
We all love to talk about the Toronto condo market. Together with high housing prices in the GTA, condos are the buzz real estate topic coming out of Toronto. Lately, I’ve been seeing a shift in the Toronto condo market.
A January 2014 report from Emporis, a construction industry researcher, showed that Toronto boasts 116 current condo construction projects as opposed to New York City’s 32. That’s definitely a lot, but according to the CMHC, the number of new condo projects has declined by almost 40% since 2010.
Despite the decline in new condo construction, prices for these units are soaring in Toronto’s metropolitan area. Let’s take a look at the shift from quantity to quality in the Toronto condo market.
Higher Prices for New Condo Units
It used to be that condos were more appealing to first-time buyers because of their price point. And resale prices are still relatively reasonable. In 2009, the average price for a condo in Toronto (according to TREB) was $320,196, as compared to an average price of $381,008 in December 2013, a 19% increase.
However, prices for newly-built condos have shifted away from entry-level for first-time buyers. Builders are developing new luxury units, and people are paying more for them: the average Toronto condo size has gone from 816 square feet in 2009 to just 785 square feet last year.
Demand Remains High
Despite the impressive number of condo developments happening right now in Toronto, the number of new condo construction projects has declined. As a result, TREB numbers show that in 2013, new condo sales declined by 22% from 2012.
And yet prices and demand for these new developments remain high. Just a casual glance at the marketing materials for any number of new projects will give you an idea why.
These days, new condo projects are all about luxury. Developments in the works like 101 Erskine Condominium and The Harlowe are high-end, quality buildings that will fetch higher prices than condos used to.
Builders are focusing on features instead of entry-level pricing for young buyers making their first real estate investments. These condos are about benefits, amenities, location, security and luxury design. Developers know that buyers are looking for gyms, rooftop terraces and pools in trendy, convenient downtown locations.
Who is Driving Demand?
What has driven this shift in the market? Where is the demand for these high-end condos coming from? Condos used to be the way for first-time home buyers to break into the Toronto housing market, and resale numbers of these existing condos are still high. But increasingly, new condos are a viable option for all segments of the market.
The biggest drivers of demand are those I call downsizers: people moving from larger homes to smaller, more manageable residences. These can be baby boomers looking to relocate to smaller homes in convenient locations in preparation for retirement, or even young professionals who want to avoid long commute times.
These buyers are often going from a detached home on a nice lot, and they’re not looking to cram into a tiny building with limited amenities and space. These folks are looking for state-of-the-art fitness centres, pools, views and high-end finishings.
The value in these condos, of course, is that you get the features without having to do the work of maintenance and upkeep. This is why condos are perfect for downsizers.
So if you are a first-time buyer looking to buy a condo to get into the housing market, you will probably need to look at resales in existing units rather than at new developments. While condos are still the vast majority of sales in the downtown core, keep in mind that builders are developing fewer units aimed at first-time buyers and entry-level prices. It’s time to readjust perceptions. It’s time to think luxury.
If you’re looking for a resale Toronto condo, visit ComFree.com today and start house hunting.