Average Price of New Condo in Toronto to Rise 27% Within 5 Years

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Average Price of New Condo in Toronto to Rise 27% Within 5 Years

If you think Toronto is expensive now, you’re in for a wake up call. As our population grows at a record pace alongside the fastest growing tech sector in the world, demand for high-rise will remain strong.

Real estate consultant and analyst, Ben Myers, President of Bullpen Research & Consulting Inc., gives us a clear picture of the state of the Greater Toronto Area’s housing market, and what we can expect in the near future. 

The City of Toronto Area now (Feb 2020) sitting at $1,300 PSF and the downtown core now between $1,500 to $1,800, you may think there’s no more higher we will go.

Bullpen research predicts a roughly 27% increase within the next 5 years for average price per square foot in Toronto.

NewInHomes sat down with Ben Myers in Dec 2019 and asks: Your predictions on per square foot prices have been pretty accurate over the years. What do you foresee for the GTA’s new housing and resale markets over the next 5 years? What do you think psf prices will average in downtown Toronto in 2024?

BM: I don’t expect to see the same level of rapid price appreciation that we’ve experienced in the market over the last three years. Part of the reason that price growth has spiked is a rise in construction costs, development charges, and land prices – this cost-push inflation is passed on to consumers. Additionally, and likely more importantly, there has been an undersupply of resale units that can be traced back to the poor pre-construction sales from late 2012 through the end of 2014, which ultimately gets felt in the resale market on a four-year lag. Resale price growth over the next few years will be muted as more high-rise completions are expected, this supply is under construction and the result of booming pre-construction condo sales in 2016 and 2017. 

The average price of popular new condo floor plans in the City of Toronto in October 2019 was approximately $1,275 per-square-foot (psf) and with growth of 3% a year, prices would hit $1,475 psf in 2024. I wouldn’t be surprised to see annual average growth of 4%, which would get you to $1,625 psf in five years in Toronto.

NIH: As the price gap closes between new single-family homes and new condos in the GTA, do you think we’ll ever see both housing types average around the same price? Or will people just put off buying and save for slightly longer in order to buy a single-family home? 

BM: I’m not sure we’ll ever see the price of an average unsold new condominium exceed the price of the average single-family home in the Greater Toronto Area. Part of the reason we’re seeing the two numbers diverge over the last couple years is the price correction in the single-family new home and resale markets scared away a lot of purchasers, in addition to the stress test making it harder for prospective buyers to qualify for a mortgage on these larger homes. In late 2018, and into 2019, developers have focused on smaller and more affordable singles, semis and row product at their sites. 

The higher prices for new unsold condominiums is a result of more luxury developments in Yorkville, and large end-user targeted suites along the Waterfront and in high-design projects in downtown west. Secondly, developers tend to raise their prices substantially once they’ve hit their 70% pre-sale target that lenders typically require to qualify for construction financing, they set pricing above market as they feel confident in their ability to sell this remaining supply over the two to five years before occupancy. Altus Group noted that there are 92 projects in the GTA over 70% sold that are in pre-construction. This is a lot of successful projects, more than typical, and many of them have set pricing above market.

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