New Condo Sales Slow as Construction Surges

TORONTO – July 31, 2018:  Urbanation Inc., the leading source of information and analysis on the Toronto condominium market since 1981, released its Q2-2018 condo market results today.

Highlights of the release include:

  • 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 63,904 units, of which 95% were pre-sold. Construction was driven higher by a record number of new condo pre-sales in 2017.
  • New condo sales dropped by 57% 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% were pre-sold by quarter end, which compares to an 80% opening absorption of the record 9,521 units launched in Q2-2017
  • The average opening price for new launches in Q2-2018 was $835 psf, up 18% year-over-year but down from the high of $954 psf 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% annually in Q2, marking an improvement over the 31% drop recorded in the previous quarter. Second quarter resales of 6,019 units remained 5% higher than the 10-year Q2 average (5,708)
  • Annual resale price growth of 5% in Q2-2018 represented a strong deceleration from the 30% 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

The slowdown in new condo activity this year was fully anticipated following the record-breaking pace of activity last year. First half 2018 sales of 9,058 units were down 58% from 2017 (21,316) and 13% below the 10-year first half average of 10,471 sales. Pre-construction buyers have become more cautious following the sharp run-up in new condo prices last year and the recent slowdown in price appreciation for resale units. New condo sales are heavily dependent on activity from investors, whose interest in the market changes with the outlook for investment returns. Developers have reacted quickly to the changing market environment by launching fewer sites (new openings declined 51% annually in Q2), which 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”, said 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” added Hildebrand.

 

ABOUT URBANATION

Urbanation is a real estate consulting firm that has been providing market research, in-depth market analysis and consulting services to the condominium industry since 1981. Urbanation uses a multi-disciplinary approach that combines empirical research techniques with first-hand observations and site visits.  On a quarterly basis, Urbanation tracks the new, resale, rental and proposed condominium apartment markets in the Greater Toronto Area. Urbanation also actively conducts site specific market feasibility studies across the country for both condominium and purpose-built rental apartment projects.

 

 

 

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