Condos have been the sole market segment showing price growth in the first quarter of 2018.
As detached houses have declined in price every month this year so far, condos have increased year-over-year.
Take May 2018, for example: the Toronto Real Estate Board reported that condo prices rose 5.7 per cent across the Greater Toronto Area as a whole, as detached houses declined 8.2 per cent, semi-detached by 1.2 per cent and townhouses by 2.5 per cent.
When we break it down, we can see that Toronto condos in the 416 rose 6.5 per cent to almost $603,000.
The 905 also saw an increase in condo prices, but only slightly, at 1.2 per cent to about $455,400. (Hint: that means you can save about $150,000 by looking at Mississauga condos instead of ones in the core.)
So what’s going on that’s making condos grow as all other property types sink?
The issue is affordability. Most buyers simply cannot afford a detached house in Toronto, and can’t borrow enough to cover the gap. One can essentially buy two condos for the price of one detached house — the average price of a GTA detached house in May was $1,045,553, while a condo was $562,892
So although many buyers may prefer to live in a single-family home, it’s simply out of reach for most.
Yet, because rent is so expensive these days, and home ownership is still a tightly held emotional goal for most Canadians, if owning a condo is the only ownership option, residents in the GTA are willing to go for it.
The low supply of both high- and low-density housing, coupled with rapidly rising rental prices and high-demand for home ownership, have put pressure on condo prices.
Despite what most may think from seeing all the cranes around the city and no parking lots left, there is not an oversupply of condo units. It’s the opposite — we have an undersupply of units. From May 2016 – May 2018, available inventory fell 27.7 per cent, from 5,527 to 3,993 units. At the same time, condo prices rose 35 per cent.
So which condos are the most popular?
Mid-priced condos, between $500,000-799,999, with two bedrooms or a den are by far the most in-demand unit.
They fly off the shelves (or realtor’s lists) and have skyrocketed between 81 – 111 per cent over the last two years.
Presumably, they’re so popular because they’re livable and take longer to outgrow.
Smaller and inexpensive units, in comparison, are less in demand. Units under $399,999 have plunged between 58-89 per cent in the same time period. These cheaper units are likely just too small to be considered a long-term option for most, especially those who would rather be in a single-family home. Or, since they’re typically only big enough for one person, they’re just too expensive to carry on a single income.
These two categories take up most of the condo market, which still isn’t very diverse.
The luxury condo market continues to boom, however
Sales for units priced above $1 million are up 51 per cent over the same time frame, while those between $800,000 – $999,999 have increased between 110 – 211 per cent. This could be because investors frequently buy these units to rent out, or they could be popular with retirees, who want a low-maintenance lifestyle, but are used to their large home and want the space.
Zoocasa calculated how Toronto condo sales have changed over the last 24 months for various condo price points. Check out the infographic below: