Photo: James Bombales
2017 was a record year for the GTA new condo market, with a whopping 35,074 units sold, up 30 per cent from the year before. And, according to one industry source, all that activity has seriously drained inventory levels.
A new report from Urbanation has found that unsold new condo inventory remained below 8,000 units for all of 2017, the lowest level since 1999.
“New pre-construction openings were met with a record level of absorption (84 per cent of units launched were sold by year-end),” reads the report.
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That level of demand — and shockingly low level of supply — meant that units were priced at an average of $1,079 per-square-foot in 2017, surpassing the $1,000 per-square-foot threshold for the first time.
Heading into 2018, Urbanation cautions that delays in the construction process could slow completions, worsening the already low levels of supply.
“A more cautious approach is expected this year as developers grapple with delays and uncertainty in obtaining approvals, and face tighter resource constraints in completing existing projects that are underway,” reads the report.
As the construction process slows, demand is expected to remain at a record high, as investors stand to make strong returns on new condo units.
“Urbanation found that of the projects that were completed and registered in 2017, average resale values were 42 per cent higher than their average presale opening prices,” reads the report. “Furthermore, it was calculated that most newly completed condo projects were able to generate positive cash flow in the rental market last year, factoring in an 80 per cent loan-to-value mortgage, condo fees and taxes.”
The report notes that, while the number of condo competitions are slated to be higher in the next three years, they may in fact be lower than projected.
“Following a five-year low for completions in 2017 to 13,513 units, which was 31 per cent lower than the 19,617 completions averaged between 2014 and 2016, condo deliveries are scheduled to increase in the next three years,” reads the report. “However, actual completions are very likely to be lower than projected, given that annual deliveries have been averaging about 7,000 units less than scheduled in recent years.”
So what does 2018 have in store for the new construction market? Urbanation VP Shaun Hildebrand says that demand continuing to outpace supply could mean fewer sales this year.
“While the results for 2017 prove how remarkably strong demand can be for GTA condos, the level of activity underway is putting the industry under tremendous pressure to push the units through the development cycle,” writes Hildebrand, in a statement. “A more sustainable pace of roughly 26,000 sales is likely in store for 2018.”