Q3-2020 Urbanation
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Q3-2020 GTA CONDOMINIUM MARKET SURVEY URBANATION MARKET OVERVIEW NEW CONDOMINIUM RESALE CONDOMINIUM CONTENTS Q3-2020 CONDOMINIUM MARKET SURVEY Market Overview Market Snapshot 3 Market Highlights 4-9 NEW CONDOMINIUM MARKET New Condominium Apartment Project Openings 10-14 New Condominium Apartment Project Openings - Project Profiles 15-16 Upcoming Launches '416' & '905" 17-19 Top 10 New Condo Projects by Sales Volume 20 New Condominium Sales Trends 21 New Condominium Absorption and Inventory 22 New Condominium Pricing Trends 23 New Condominium Market By Construction Status 24 Top 10 Municipalities and Submarkets for Development 25 RESALE CONDOMINIUM MARKET Resale Condominium Sales Trends 26 Resale Condominium Supply Trends 27 Resale Condominium Pricing Trends 28 Top 10 Municipalities and Submarkets for Sales Activity 29 Resale Activity and Growth by Unit Type 30 MARKET OVERVIEW NEW CONDOMINIUM RESALE CONDOMINIUM PAGE 3 SALES 6,370 units, +30% Y/Y UNSOLD INVENTORY 12,962 units, -4% Y/Y NEW CONDOMINIUM AVERAGE SOLD PRICE PSF MARKET $884, +9% Y/Y NEW LAUNCHES +162% Y/Y, 74% sold (4,968 units) OPENING LAUNCH PRICE PSF $1,044, -0.3% Y/Y SALES 6,405 units, +9% Y/Y SALES-TO-LISTINGS RATIO 50%, Q3-2019: 67% RESALE AVERAGE DAYS ON MARKET CONDOMINIUM 19 days, Q3-2019: 21 days MARKET ACTIVE LISTINGS 5,885, +132% Y/Y AVERAGE PRICE PSF $744, +8% Y/Y MARKET HIGHLIGHTS MARKET OVERVIEW NEW CONDOMINIUM RESALE CONDOMINIUM PAGE 4 New condominium apartment sales in the GTA increased 30% year-over-year in Q3-2020 to New Condominium Sales Reach Record Q3 on Growth in 905 Region 6,370 units, reaching a record high for third quarter activity. However, total year-to-date The GTA new condominium market posted impressive results amid the ongoing sales were 22% below last year at 13,454 units. A 74% share of the 6,694 new units pandemic in the third quarter, with sales reaching their highest level of 2020 during launched in Q3 were sold by the end of the quarter, the highest absorption rate for new what is normally one of the quietest periods of the year for sales. As the economy was launches since Q4-2017. Unsold inventory declined 4% year-over-year to 12,962 units, which progressing through the province’s three-stage reopening plan and the resale market was 11% below the 10-year average (14,545 units). Unsold units available at the end of the began staging a sharp recovery from the initial months of lockdown, the new quarter were priced at an average of $1,106 psf across the GTA, up 7% year-over-year. A total condominium market gained steam, although driven entirely by activity in the of 6,816 new condominium apartments reached completion in the GTA in Q3-2020, bringing suburban areas of the GTA. New condo sales in the 905 region increased 106% from a total year-to-date completions to a record 17,596 units — 47% higher than the same period year ago to 3,834 units, representing a record high share (60%) of GTA new condo last year (11,952). sales as activity in the City of Toronto (416 region) declined 16% year-over-year. Recognizing a general shift in housing demand to more suburban locations that was accelerated by the onset of the pandemic, developers ushered in new projects in the 905 during the third quarter, which were very well received. The fourteen projects totaling 4,318 units that launched in the 905 region were 74% sold by the end of the quarter at record prices averaging $915 psf. Evidently, investors and end-users began placing a higher value on less expensive locations outside of central Toronto. However, the more limited number of launches that occurred in the 416 region also performed very well, with 75% of 2,376 units sold in the quarter. Although at $1,275 psf, average sold prices for new Q3 launches in Toronto were somewhat lower than the pre- pandemic average of $1,324 psf in Q1-2020. MARKET HIGHLIGHTS MARKET OVERVIEW NEW CONDOMINIUM RESALE CONDOMINIUM PAGE 5 As most units that launched in the City of Toronto during the third quarter were located in in Q4-2019 to a two-year low of $369 psf in Q3-2020, which was still $126 psf higher than the and around the downtown area, their success was a testament to the underlying market gap in Q3-2017 ($242 psf). With unsold inventory in the 905 equal to 5.4 months of supply, confidence in the core, which held up despite Urbanation’s data showing a 12% annual compared to 8.5 months in the 416, price appreciation in the 905 can be expected to decline in average per sf condo rents in the former City of Toronto. However, the confidence continue to outperform in the near-term, further narrowing the gap relative to the 416. among new condo buyers is becoming more evenly spread out across the region, with markets such as Mississauga and Vaughan starting to routinely record similar new launch sale volumes as the City of Toronto, with prices approaching $1,000 psf. The 905 markets such as Mississauga and Vaughan have started attracting investors to the same degree as downtown sites by offering large-scale development projects connected to mixed-use areas and newly expanded transit, all at substantial price discounts and higher rental yields relative to projects in the core. Indeed, the extremely strong run-up in prices for downtown new condos in 2017-2018 meant that the outlook for future returns would be harder to achieve. As attention shifted to value-oriented markets, the dynamics of price growth for new condos in the GTA has started to change. In the third quarter of 2020, the index price for unsold new condominiums in the former City of Toronto grew 4% year-over-year, its slowest pace in five years. Appreciation was slightly better at 5% in the outer 416 municipalities (North York, Etobicoke, Scarborough), but still only at one-third of the annual growth recorded in the 905 Region at 15%. As a result, the gap between prices in the 416 and 905 is starting to narrow, declining from a high of $433 psf in MARKET HIGHLIGHTS MARKET OVERVIEW NEW CONDOMINIUM RESALE CONDOMINIUM PAGE 6 Overall, sales activity for new condominiums has re-aligned with resale volumes in the GTA, restoring the long-term trend between the two markets. Resale activity, which often acts a leading indicator for new sales, stabilized at just under 20,000 units in the four quarters ending Q3-2020, with the market generally in balance with a 50% sales-to-listings ratio and 2.8 months of supply. While annual price growth remained strong in Q3 at 7.5%, this was largely owing to a sharp acceleration in prices in late 2019-early 2020. In fact, on a quarter- over-quarter basis, resale prices were down 1.8%, and have declined 2.4% since the pre- pandemic period in Q1-2020. By all measures, the former City of Toronto moved to the lower boundary of a balanced market, reaching 4.0 months of supply, with several submarkets having moved past this level and entered into buyer’s market territory. The softness has remained mostly isolated so far, as the outer 416 and 905 markets reported resale supply levels of 2.2 and 1.9 months, respectively. The former City of Toronto is grappling with a record number of active listings at the moment, which stands to rise even higher if the trend towards owners looking to move out of the city and investors trying to exit the market amid plunging rents continues. The question of whether this weakness spreads to other markets in the GTA remains, but if the rental market can provide any useful indication, conditions outside the core continue to remain stable. The decline in resale condo prices over the last six months doesn’t necessarily signal the start of a broader downward trend for the market. Part of the decrease can be attributed to a compositional shift in sales to less expensive markets in the 905 region, which weighs down the average to some degree. Much like the new condo market, the third quarter saw a record share of resale condominium activity occur in the 905 region, reaching 33% as sales increased 12% year-over-year. Interestingly, resales in the former City of Toronto kept a fairly close pace with the 905 as sales grew 10% year-over-year in Q3. However, with listings during the quarter surging by 78%, the sales-to-listings ratio dropped to 41% in the former City of Toronto, compared to 59% in the 905. MARKET HIGHLIGHTS MARKET OVERVIEW NEW CONDOMINIUM RESALE CONDOMINIUM PAGE 7 In examining the change in resale condo values in Q3-2020 with the pre-pandemic period in Q1-2020, average prices in the former City of Toronto were down 6.3%. While still up 3.4% on a year-over-year basis, annual growth is sure to turn negative by the first quarter of 2021, potentially showing low double digit declines. How this impacts market psychology will be key, as some investors have continued to hold their properties despite having negative cash flow, banking on appreciation to offset rental losses. On the other hand, record low interest rates generally drive demand for real estate investments, which will create some interesting dynamics in the months ahead. But, with the job market still recovering and immigration levels well below normal, while at the same time new condominium completions continue to remain near record highs into 2021, supply side forces are more likely to continue outweighing demand in the near-term.