New condo activity has slowed down in Toronto and the GTA, but new condo construction is surging.
A report by Urbanation Inc. details the slowdown. The Q2-2018 condo market results show a drop in new condo activity that was fully anticipated following the record-breaking pace of activity last year.
In the first half of 2018, sales of 9,058 units were down 58 per cent from 2017 (21,316) and they were 13 per cent below the 10-year first-half average of 10,471 sales.
Pre-construction buyers have become more cautious since the sharp spike in new condo prices last year and the recent slowdown in price appreciation for resale units.
Investors are key to new condo sales. The sales strongly depend upon their activity and interest in the market changes with the outlook for investment returns.
Now, developers have reacted quickly to the changing market environment by launching fewer sites.
New openings declined 51 per cent annually in Q2. This has helped to keep inventory levels low and prices fairly steady at elevated levels compared to last year.
“Fewer new pre-construction condo sales this year will help to keep the supply pipeline in check as construction starts and completions move to new highs over the next couple years,” says Shaun Hildebrand, president of Urbanation.
“Ultimately, low unsold inventory and a stabilizing resale market will provide support for the new condo market in the second half of 2018.”
Other Highlights Of The New Condo Sales Report
- Condo apartment construction starts in the GTA reached a record 7,981 units in Q2-2018.
- The total number of condo units under construction also hit a high of 63,903 units, of which 95 per cent were pre-sold. Construction was driven higher by a record number of new condo pre-sales in 2017.
- New condo sales dropped by 56 per cent annually in Q2-2018 to 4,977 units as new project openings slowed and absorptions moderated to their longer-term average.
- Of the 5,759 units brought to market in pre-construction projects in Q2-2018, 56 per cent were pre-sold by quarter end, which compares to an 80 per cent opening absorption of the record 9,521 units launched in Q2-2017.
- The average opening price for new launches in Q2-2018 was $835 per square foot, up 18 per cent year-over-year but down from the high of $954 per square foot for units launched in Q4-2017.
- Unsold inventory in development moved up to 9,341 units — the highest level in six quarters but well below the 10-year average of 15,807 units.
- Condominium apartment resale volume was down 17 per cent annually in Q2, marking an improvement over the 31% drop recorded in the previous quarter. Second quarter resales of 6,019 units remained five per cent higher than the 10-year Q2 average (5,708).
- Annual resale price growth of five per cent in Q2-2018 represented a strong deceleration from the 30 per cent annual growth recorded a year ago in Q2-2017. Continued positive resale price growth has been supported by low levels of supply, as total listings have declined year-over-year for 10 consecutive quarters.