A recent report found that condo buyers are extending their home search to the outskirts of the Greater Toronto Area, likely in search of relatively affordable prices and more square footage for their dollar. I don’t think this trend will last long.
According to Urbanation’s second quarter condo market results for the GTA, the average price per square foot for a new condo in the former City of Toronto was $1,284. This is much higher than the outskirts of the GTA and certain 905 areas.
Condo sales in the former City of Toronto only accounted for 19% of the GTA’s total sales for the quarter, and only 44% of the launched 2,200+ units sold. In Scarborough, Etobicoke, North York, condo sales doubled, and sales in the 905 increased 150%.
My best guess is these condo buyers moving to the outskirts of the GTA are millennials moving up into a larger condo, and empty nesters looking for more bang for their buck with regards to space. It’s not hard to picture a millennial couple owning a one-bedroom in downtown Toronto, looking for a two-bedroom to start a family, and still being priced out of the expensive single-family market.
Aging millennials need more space. They’re having kids, accumulating stuff, and are starting to make slightly more money. But, their salaries aren’t increasing at the same rate as housing prices. A few decades ago, boomers were buying townhomes, semis, and detached homes to start their families. Millennials are at this stage in their lives, but a larger condo is all they can afford.
This isn’t necessarily a bad thing though. I’m a strong believer in high density housing and shared spaces. This type of residential development near major transit nodes is necessary to accommodate the GTA’s growing population. I just wish everyone was more accepting of high-density housing because I think some people feel forced into it.
So, condo buyers are looking more to the outskirts of the GTA, but here’s why I don’t think this trend will go on for too long. The federal government’s two programs for first-time buyers should give some condo buyers more borrowing power so they can afford the condo they want in the heart of downtown Toronto.
The First-Time Home Buyer’s Incentive will be available September 2, 2019, and it will give first-time buyers who are on the verge of affording a new home that extra little push through a shared equity mortgage with the Canada Mortgage and Housing Corporation. There’s also the Shared Equity Mortgage Providers Fund, which is completely separate and will go towards supporting housing projects and SEMPs to create opportunities for more first-time buyers. This program just launched at the end of July 2019.
With support from the federal government, more first-time buyers will be considering downtown Toronto condo developments. I don’t think either program will have a huge impact, but we can still expect thousands of first-time buyers across the country to benefit, and some of them will be in Toronto.
Then there’s Generation Z (born around the mid 1990s). The oldest Gen Zers alive right now are approximately 23-24 years old. They’re finishing school, working full-time, starting careers, so it’s only a matter of time before they’re buying homes. Where are they going to look? Young, working professionals want to be downtown where the action is, where they don’t have to own a car, where they can walk to the grocery store or restaurant.
Generation Z is also the fastest growing demographic. They increased by roughly 150,000 a year between 2016 and 2018. Millennials only grew by 60,000 a year over the same time. Gen Zers will soon outnumber us all, and they all have to live somewhere.
So, before you start thinking downtown Toronto is old news, just remember that real estate works in waves. Things go up and down, people leave and return, the population transforms right before our very eyes - one thing remains consistent though, we all need a place to call home.