Condo prices in Toronto’s core have been rising dramatically and according to a recent report by Urbanation they’ve reached a new record at $1000 per square foot for new builds. The real estate market is, once again, back in Toronto’s ‘good books’ and you know it must be ‘official’ when all of the same media outlets who have spent the last 4-months sh*tting on the market have suddenly flipped their switch. Like the Globe and Mail’s recent article, “Canada home sales tick up for third straight month in October” or this article by CBC, “Toronto, Vancouver house prices set for rise: CIBC report”.
Throughout all of this media fear-mongering and BS, I’ve done my best to keep it real and share my educated thoughts on the matter with all of you. Over the last few months I’ve been preaching that the condo market is healthy and prosperous for investors. The market was never the issue! The truth is that all of the misinterpreted information that was being passed around the city, like kindergarteners pass around the chicken pox, has created scaredy-cat mentalities among Torontonians alike and has led to many stagnant purchasers.
If you were listening to those “35% decrease in sales” — another misinterpreted stat — and rather than heeding our advice you decided to sit on the sidelines waiting for “a better time to buy” then you’ve likely missed it. The market is looking healthy for the long term and the sooner you get in, the better. So with that said, the best time to buy is now!
DON’T EXPECT CONDO PRICES TO DECLINE
One of the biggest things to keep in mind here is the fact that the builder’s hard costs, including materials, but specifically the value of the land has risen as well. Developers are in the business of making money. They simply will not plan and build a project unless it will be profitable. For more on this subject check out Bloomberg’s article, “Even Real Estate Developers Can’t Afford Toronto’s Housing Market”.
The other caveat of the Toronto market is that the cost of borrowing money in Canada, when compared to other major markets is still quite low and condos remain the most affordable option for new homeowners breaking into the market.
When you couple the above with Toronto’s low inventory and the fact that there simply isn’t enough housing in the pipeline to meet demand, and projected immigration, it’s quite clear that the Toronto condo market will remain strong.
If you want to read more on the subject and why we believe it’s a great time to invest in Toronto condos, you can read the full article here.
TORONTO CONDO INVENTORY SHORTAGE
A 30% increase year-over-year is not sustainable in Toronto, but a $1000/sqft is our new reality. A pace at which the Toronto real estate market simply cannot sustain indefinitely. However, with such a shortage of available and planned inventory it doesn’t look like much will change in the near future. Especially as most first-time buyers entering the market will continue to look to condos as their entry point of home ownership.
The largest dilemma however, is the fact that existing and planned condo stock will not accommodate this growing demand. Available inventory for new build units is down year-over-year by 40%, meaning fewer new builds for both investors and end-users to purchase. This will eventually equate to less available rental inventory. When these new builds come to fruition there will be 40% fewer new condos hitting the market meaning fewer rental properties for tenants, further fuelling the inventory shortage.
Also of note is the increasing demand for units with more than two bedrooms. These ‘family size’ suites are becoming more and more sought after, as new families are remaining in condos longer while many home-owners are looking at downsizing.
For more on the shortage of available ‘family size’ inventory, you’ll want to read our latest article on the topic, “Why Condo Families are Getting it Right.”
Long story short, the shortage of Toronto condos is poised to continue and prices will remain stable for the foreseeable future. If you have yet to jump into the real estate market now is a good time to do so because as they say, tomorrow is worse than today, but yesterday is better.
If you’re thinking about a new build you won’t want to miss our free guide, “A Free Guide to Investing in Pre-Construction Toronto Condos.”