Condo demand showing no signs of slowing down

The Toronto Real Estate Board (TREB) released its condo and rental market report for the fourth quarter of 2017 (Q4-2017) announcing steady demand for condo living in the Greater Toronto Area (GTA).

GTA realtors reported 5,773 condo sales through the MLS system in Q4-2017, which is a year-over-year drop of 15.4%. While sales were down, listings shot up 9.8% to 8,186, which was some much needed inventory. The sales-to-new listings ratio is at 70%, which is slightly too high to be considered balanced.

“Demand for condominium apartments remained strong relative to listings in the fourth quarter,” says TREB President Tim Syrianos. “Even with the uptick in listings, which was certainly welcome, there was enough competition between buyers to prompt double-digit annual rates of price growth. This points to the fact that we still do have a supply problem in the GTA that needs to be addressed to ensure the long term sustainability of the marketplace.”

The average selling price of a condo in the GTA increased 17.9% to $515,816. Toronto was the most expensive region of the GTA with an average selling price of $549,472. Toronto also had the vast majority of the sales with 4,198.

“Seller’s market conditions remained in place for the condominium apartment market segment in the fourth quarter,” says Jason Mercer, TREB’s Director of Market Analysis.  “Based on price point, this housing type remains top of mind for many first-time buyers. In addition, as home prices have grown year-over-year some buyers who initially may have considered the purchase of a low-rise home have chosen to purchase a condo apartment as well.”

The condo rental market

The average monthly rent of a one-bedroom condo unit in the GTA increased 10.9% in Q4-2017 to $1,970. The average for a two-bedroom jumped 8.8% to $2,627.

“As the population in the GTA continues to grow, so too does the demand for rental accommodation,” says Syrianos. “The problem is that rental supply has not kept up with the increase in demand in recent years. The result has been low vacancy rates and intense competition between renters for available units. This competition has underpinned very strong growth in average rents.”

Listings were down 3.4% and leases were down 0.7% during Q4-2017. In fall 2017, vacancy rates for rental condo units were below 1%.

“Looking forward, we continue to have concerns that rent control legislation announced in conjunction with the Ontario Fair Housing Plan will preclude additional rental supply coming on stream, both in the purpose-built and investor-held condominium apartment segments,” explains Mercer. “Going further, it is possible that current owners of condominium apartments could choose to list their units for sale to take advantage of recent price gains rather than rent their units to tenants under the new rent control regime.”

So, it’s possible that the rental supply could drop even more and we may see a surge in condo listings in the GTA. With plenty of new condo supply in the pipeline, hopefully the new home market is able to meet demand!