There are more than 12,000 unsold new condo units available across the Greater Toronto Area, but guess what, it’s not enough.
Urbanation, a leader in GTA condo market information, released its condo market results, reporting that pre-sale condo launch activity hit a 10-year low in the first quarter of 2019. Only eight new projects launched in the first three months of the year, bringing 1,827 new units to market, which is the lowest for the first quarter since 2009. The fewer launches led to a slowdown in sales, with just 3,073 units sold, which is 26% lower than the first quarter of 2018.
While launch activity was low, construction hit a record high with 71,378 new condo units under construction across 242 projects. This beats out the previous record set last year in the first quarter when there were 61,555 units under construction across 221 projects.
As of the end of the first quarter, there were 12,232 new condo units available in the GTA, which is much higher than the 15-year low of 8,803 units we had a year ago, but it’s still well below the 10-year average of 15,003 units. Of the unsold units, only 249 are completed, and there are another 261 unsold units under construction scheduled for completion this year.
So, the majority of the condo inventory is in the preconstruction phase and early construction phase, which means there’s a tremendous amount of pressure on trades. This amounts to an increase in construction costs, leading to higher prices for buyers.
“A particularly slow period for new condo sales activity in early 2019 will give way to a busier second quarter as project launches increase and demand fundamentals in the GTA remain solid,” says Shaun Hildebrand, President of Urbanation. “However, it’s also important to recognize that the growth trajectory for condo prices is starting to change and slower rates of appreciation are emerging relative to the past few years.”
The average price of a new condo in the GTA increased 1.7% compared to the previous quarter to $779 per square foot. This is much lower than the 2.9% quarterly growth recorded in 2017 and 2018.
Price growth on a year-over-year basis was much greater with the average price of sold units jumping 10% and unsold units seeing 9% growth to $998 psf. Urbanation says this is the first time the unsold average price saw single digit growth in the last two years. With especially low inventory in downtown Toronto, the average asking price for new condo units increased 13% year-over-year to $1,279 psf.
It’s a different story in the resale market. The average price of a condo fell 1.2% from the previous quarter to $683 psf. Urbanation says price growth moderation is typical from fourth quarter to first quarter, but this is the first quarterly decline since the first quarter of 2014. Reale transactions were practically unchanged from a year ago, finishing the quarter with 4,277 units sold.
Now that the province’s Housing Supply Action Plan has been announced, we’re interested to see how long it takes for new condo inventory in the GTA to start rising.