There’s a subtle shift under way in the Greater Toronto Area’s pre-sale condominium market in 2018:
As developers are launching fewer towering projects designed to woo investors, they are finding there’s still a strong market for people looking to pay a little more money for a larger, family-friendly unit in neighbourhoods outside the downtown core.
In 2017, according to data collected by Urbanation Inc., the number of projects was 105 compared to 2016 where the record was much lower at 81. The shift set by developers were high-rise projects that featured higher volumes of lower cost studio and one-bedroom apartments. Those are the kind of unites investors looking for a piece of the market have traditionally snapped up, oftentimes renting their condo or looking to flip it on the equity appreciation. But there has been a slowdown in the number of projects wooing that buyer.
Shaun Hildebrand, Chief executive from the firm Urbanation Inc, states that “some investor fatigue has crept in.” He believes developers have slowed their frantic pace of announcements in part because of large increases in construction costs and delays in getting approvals. According to Urbanation, the first half of 2018 saw 27 launches of condo projects taller than 12 storeys, 34 per cent lower than the 41 projects in same period or 2017. Building launches under 12 storeys, often called mid-rise, had a smaller drop-off of 12 per cent from 17 launches in the first half of 2017 to 15 launches in 2018.
This trend isn’t a straight line and one reason for the relative strength of new mid-rise launches is the simple supply-demand dynamic: Consumers can’t seem to get enough of them and that’s driving the price up. “The market is substantially under supplied in mid-rise,” said Mr.Hildebrand.
Another drift specific to Toronto is that the number of units per mid-rise launch has been growing: from 80 a launch in the second half of 2016 to 145 a launch in the first half of 2018.
Stephen Price, chief executive of Graywood Developments Ltd., said he has seen the demand for mid-rise units grow in the GTA and Calgary over the past five years. Graywood, who will begin a project at the old Wonderbread factory, naming it “Wonder” a 462 unit mixed with lofts and town houses, a 2 bedroom can range in $600,000. In May 2018, it began pre-sale of these units. Graywood is providing an alternative to the community where homes are not available for under 1 million.
Serge Younan, broker with Century 21 who specializes in finding buyers pre-sale condos states “There’s a lot of end users that are buying now, that shifted over the last year or two years. Maybe someone that lives in the area, sees a condo is launching, and says ‘yeah, I want to live there,'” he said.
The price for downtown condos is now approaching an average of $1,000 a square foot, which prices out many buyers and makes mid-rise outside the core a potent value proposition.
The interval time between pre-sale and completion for mid-rise is also about half of the average five years it takes to finish a high-rise, Mr. Price said, which helps to contain costs: “You can make up some of the economics through a more timely building program.”
Mr. Younan, a pre-sale specialist, states that but pre-sale specialist Mr. Younan said the increased competition from end-users isn’t the end of the party for high-rise condo investors, yet.” If we had this conversation again a month from now, the perspective would change,” he said. “I know of a few buildings that are coming out that are going to be 40-storey high-rises.”
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