The Toronto Real Estate Board (TREB) released its third quarter 2017 condo market figures, announcing significant year-over-year price growth and a drop in sales in the Greater Toronto Area (GTA).
“The condominium apartment market segment has exhibited the strongest average rates of price growth since the spring, relative to other major market segments,” says TREB President Tim Syrianos.
“Competition between buyers remains strong, as listings remain below last year’s very constrained levels,” he adds. “Over the past few months, TREB has participated in discussions at various levels of government pointed at developing solutions for the housing supply issue in the GTA. As these discussions continue, it will be important to remember that the condominium apartment market is not immune to a listings shortage.”
There were 5,684 sales reported through the MLS system, which is much lower than the 7,991 sales in the third quarter of 2016. Listings also dropped by 10% to 9,845. With a drop in sales and listings, the average selling price spiked by 22.7% to $510,206, compared to $415,894 last year.
“Condominium apartments will likely account for a greater share of home sales as we move forward. Consumer polling undertaken for TREB by Ipsos in the spring pointed to increased buying intentions for condominium apartments,” says Jason Mercer, TREB’s Director of Market Analysis. “With this in mind, it is not surprising that we have continued to see robust price growth, as demand has remained strong relative to available listings.”
The same song is being played in the GTA’s rental market. While rents are up, listings and leases are down. In the third quarter, the average monthly rent for a 1-bedroom increased by 11.2% year-over-year to $1,976. Average monthly rent for a 2-bedroom increased 7.7% to $2,607.
“Competition between renters remained very strong for available units in Q3. It is clear that supply is part of the issue,” says Syrianos. “Different levels of government have committed to looking at housing supply through the policy lens. TREB has participated in these policy discussions and looks forward to continuing the dialogue. To this end, TREB does have concerns that increased rent controls and a possible vacancy tax in the City of Toronto could serve to reduce the supply of available rental units as potential investors look to less-regulated sectors in which to invest.”
Rental listings were down 3.9% in the third quarter to 11,574, and the number of units leased dropped 4.7% to 8,716.
It’s a different story for rented townhomes though. There were 1,022 townhomes listed during the third quarter, which is 8.3% higher than last year, and there were 657 signed leases - an 8.8% increase year-over-year.
“It is reasonable to assume that the vacancy rate for condominium apartments has trended lower this year,” says Mercer. “If the current relationship between rental demand and supply remains in place moving forward, rent increases for available units will continue to trend well-above the rate of inflation. Economic and demographic trends suggest that rental demand will increase and there are real concerns that the already constrained supply of units for rent could get worse.”
So, despite rent control and a possible vacancy tax, if you’re considering investing in a new condo to generate rental income, it looks like it may be time to buy.