Following years of slow growth, the condo market in Toronto finally came back to life at the beginning of this year. In January, builders were completing more than 10,000 new condo units, representing eight times more than the monthly average for the number of condos under construction in the last 10 years, according to a report published by The Globe and Mail. Most of the new condo units had already been sold. Even so, the vast number of new condos assisted in increasing the number of unabsorbed units to a historical high.
Local Condo Market Rebounds from Previous Economic Concerns
The news was certainly good for the local condo market, which had been surrounded by concerns from both international organizations as well as federal regulators regarding increasing household debt throughout Canada. An increasing condo boom in Toronto also served to underscore the fact that lenders finally began to venture back into the market this year.
In the past, largely due to pressure from federal regulators, banks had fled the condo market in Toronto, opting to work only with large-scale developers and typically requiring developers to prove a large percentage of presales prior to issuing an agreement to finance construction of a new building.
With the condo market finally beginning to boom again, lenders this year became willing to finance up to 75 percent of a project’s value. Many lenders have also eased presale requirements, requiring fewer presales while demonstrating an increased confidence that builders will locate buyers for unabsorbed units.
Moving further into the year, the Toronto Real Estate Board announced that condo sales remained strong year-over-year. In the third quarter of this year, condo sales were up by nearly 11 percent compared to Q3 2014. The Toronto Real Estate Board went on to report that the local condo market has proven to be a critical contributor to overall home sale growth this year. Such sales growth is expected to continue into the fourth quarter, with Toronto on track to hit a new condo transaction record for the year.
Both Demand and Sustained Sales Growth Remain Strong in Local Market
While the condo unit absorption rate continued to grow over the past year, increasingly tighter market conditions helped to drive sustained price growth. During the third quarter, annual growth in both average selling prices and median selling prices outpaced the annual inflation rate. The average condo sales price increased by 5.4 percent year-over-year, while the median condo selling price increased by 4.4 percent.
An increase in the supply of listings in the local Toronto area has further benefitted the condo market. During the first three quarters of 2015, sales growth exceeded the level of growth in listings, which could indicate the presence of pent-up demand in the Toronto condo market. Investor-held units listed for sale were absorbed rapidly even while new projects were completed. Moving forward into 2016, the local condo market should remain well on track for another banner year.