Has the New Legislature had an Effect on the Toronto Condo Market?
We saw government interaction in the Toronto real estate market at the end of April. What effect has it had on condos since being put in place? I was recently at a condo presentation about the market by Urbanation and this is what the market is looking like right now.
We definitely did not see a decline in resale condos in the 1st quarter of 2017. In fact we saw the largest sales numbers ever with over 31,000 but this was just continuing the trend from the past 3 quarters. What we are finding is that very few new listings are hitting the market so some of the older inventory is selling. In the 1st quarter of 2016 we saw inventory sitting at over 18,000 suites available and since that time it has dropped to 6,481 units. Was this all because of the new legislation? No, we have seen the same drop year after year. In new development we have actually seen a rise by over 5,000 units sold during this same period of time with the largest growth happening in the 1st quarter of 2017.
So as we know lower inventory tends to promote higher prices. Prices have continued to climb as we saw the average square foot rise from $600 to $733 over the past year. Though just in the past few weeks we have seen some buildings selling at a lower price but overall prices are holding strong and in some areas continuing to rise.
One of the biggest changes is that we're seeing buyers shift from 1 bedroom suites to 2 bedroom suites. In 2016 56% of sales were 1 bedrooms to just 33% of 2 bedrooms. In 2017, we have seen that gap close dramatically to 50% of buyers are buying 1 bedrooms to 41% buying 2 bedroom suites. I have a few theories on this; firstly, our baby boomers are downsizing more and looking for larger units to live in and secondly we are seeing more multiple buyers for a unit so it's not just the singles buying up all the units.
One of the topics of discussion was value of new buildings after the sale and we are still seeing increased value for the investors of their investments. Will it be enough to absorb the 15% tax? Only time will tell but so far it has been still proven to be a strong investment. We have to remember there is a major housing shortage in Toronto and the prices continue to rise dramatically. Detached homes rose 32% last year but condos also had an impressive value increase of 25%. All this helps the condo market as we are seeing more demand for condos in the city and more buyers are willing to pay a higher price.
One major area of the market that has declined to almost zero is the 1st time home buyers that are trying to get into the market at under $400,000. This is virtually impossible in the housing market but is also tough in the condo market. We are seeing young families or professionals adjusting to living in condos and we will continue to see this trend in the foreseeable future.
The last area that was discussed was buying and renting. This is still a very strong market as we saw the average rent rise from $1,991.00 to over $2,058.00 proving that if you have the downpayment renting your properties out is still a strong investment return.
Overall we are going to see a few ups and downs over the next few months but this will be more of buyers and sellers and even real estate agents looking to see how all the new legislation play out. I think it is crucial if you are looking at buying or selling a condo you need an agent that solely focuses on the condos market this move to save or earn you 10's of thousands of dollars.
I will stay on this and do another report in the next 60 days as we know there will be a shift in Toronto's condo market.