Will Toronto’s condo market settle down in 2018?
Experts are saying Toronto’s heated condo market is set to level out in the first quarter of 2018, but before it does, the average price per square foot for a downtown pre-construction unit will reach the $1000 threshold, according to Shaun Hildebrand, senior vice-president of property market research firm Urbanation, in their third-quarter report. Unsold condo inventory has already reached an average of $991 per square foot, and there are also re-sale buildings located along the Bay Street corridor and in the city center that are trading at more than $1000 per square foot. “A couple of projects that have opened in the fourth quarter have prices well above that level,” Hilderbrand explained. At current prices, demand will begin to moderate. This will, in turn, lead to higher levels of inventory, which will help to create a leveling-off effect and settle the overactive market a little.
The levelling off is imminent because market activity for new condos in the area has already reached an unsustainable pace, the report stated. “We’re seeing signals from the re-sale market that prices have already started to flatten out,” said Hildebrand. For the first time in more than three years, re-sale apartment prices dropped slightly from the second quarter to the third, from about $650 to $648 per square foot—which, however, is still 27% higher than a year ago.
Toronto condo prices will settle down a little in 2018
Although the foreign buyers’ tax implemented by Ontario in April for the purpose of cooling the market hasn’t led to any significant leveling off (despite a slight slowdown in resale activity), on the pre-construction side, figures from another Urbanation study show that only about 5% of new condo purchases in Toronto involved foreign nationals, which suggests other factors as more significant.
Condos represent about 30% of Toronto’s rental stock, so it is worth noting that the continual growth in condo rents is expected to plateau with the completion of about 20,000 new units in 2018. While expanded rent controls are not discouraging condo investments, the limitations could motivate investors to sell off their units more rapidly. The 4577 new condos sold in the Toronto area in the third quarter of 2017 signified a 30% year-over-year decline with fewer new projects on the market after “an explosive first half,” according to the report.