With the Toronto housing market quickly approaching the year’s final business quarter, now is the time to reflect on what has changed so far in 2021, and what could be coming next for the city’s new construction industry.
Overcoming an early-year lockdown and challenges created by the COVID-19 pandemic, Toronto’s 2021 new condo market has been defined by near-record sales levels, price increases and low supply compared to high demand. Across the Greater Toronto Area, the new condo market continued to recover in the first half of 2021, reporting the third-highest level on record for sales in Q2-2021 according to research from Urbanation.
Livabl caught up with Simon S. Mass, CEO of The Condo Store, to review how Toronto’s new construction condo market has fared so far and where it may be heading.
Livabl: We’re now in the last leg of 2021’s third business quarter. Looking back on the year so far, what Toronto new condo market trends have stood out to you? What are your observations when it comes to local pricing, unit supply and buyer behaviour?
Simon S. Mass: We always remind clients that pre-construction is different from resale, so the markets work slightly differently.
The most impactful trend we’ve noticed is the continuation of pricing increases. We are looking at some projects north of $1,400 per square foot, all the way up to $2,000 for some great inventory in downtown Toronto. Supply continues to be at normal growth levels, and from what we can interpret talking to people in the industry, as well as clients and investors, the buyer behaviour we are seeing is slightly more aggressive on the investment front than pre-pandemic. The value of real estate as an investment vehicle has come even more to the forefront over the past couple years.
L: In December 2020, you told Livabl that consumer confidence data pointed to a return to normal market conditions by summer 2021. Would you say that that prediction became reality? Are there any scenarios where it did not?
SM: In actuality, broadly speaking, it was probably earlier than summer 2021. But yes, what the industry is seeing is clearly a situation where consumers are comfortable spending their investment and hard-earned money. This is especially true when the fundamentals of the pre-construction market — specifically Toronto — show such positive signs for long-term investment.
L: According to a recent Urbanation report, new Toronto condo sales reached their third-highest quarterly total on record in Q2-2021. What factors do you think contributed to this record last quarter? Has Toronto’s new condo market officially recovered from any COVID-19 challenges?
SM: We preached, somewhat aggressively during the pandemic, about the importance of Toronto as a city and for investors to think long-term with their investment strategy, specifically when looking at pre-construction condos.
Q2-2021 was when the last switch flipped in the confidence metre surrounding Toronto real estate. With all of the recent reports about people “coming back” to the city, it’s nice to see that affirmation about what we were saying, even when it was tough to see what the long-term outcome would be coming out of the pandemic. Truly the people didn’t leave, they were just waiting.
L: Urbanation’s report also noted that the ‘905’ region in the Greater Toronto Area led the way with sales in Q2-2021, taking home 58 per cent of new condo sales. Why have the outer-city regions claimed more of the condo sales recently? Is this a matter of supply or is the ‘urban exodus’ trend that picked up during the height of the pandemic continuing to drive buyer interest in these areas?
SM: It’s a result of price and perceived location flexibility. Consumers saw relatively lower prices and talked themselves into an apples-to-apples comparison with the city, which is not correct.
In addition, we are talking about a small window of time where many folks are adjusting their residence. Their primary residence is not an investment property. This too will pass, and the standard numbers will once again be the norm once everyone shuffles around the GTA. There are some great properties in the suburbs surrounding Toronto. However, for our clients, and when we consult with younger investors to determine return-on-investment and long-term stability, Toronto is the preferred area.
L: Low inventory continues to persist in the GTA’s new housing segment. According to the Building Industry and Land Development Association (BILD), the number of new condo inventory dropped to 9,483 units in July. How have supply levels influenced the new construction market activity throughout 2021? How and when do you think available supply numbers will increase?
SM: Real estate in Toronto may seem like a market unto itself in terms of how it reacts to economic stimuli, but it’s still a market acting just like all markets.
What I mean is even though there has been record activity in the market overall, and so much has been written about price increases and bidding wars, the forces of demand and supply still reign. Especially when taking a macro look and projecting many years into the future.
There is no question that supply is an issue in the GTA. Lots has been written and studied about why and how it has come to this, but it is the truth. Until the supply issue is solved, you’ll see price increases, but Toronto is going to see price increases regardless — look at any similar city in other countries. The lack of supply will keep prices growing even further.
L: Before you know it, the end of the year will be here. Do you have any early condo market predictions of what we could see into the fall and late 2021?
SM: I think you’ll see savvy investors increasing their portfolios with downtown real estate. The numbers are too big to ignore. Pricing and inventory will slide along their growth curves, as they tend to do.
All in all, I think that 2022 will look a lot like 2021 as the market finally settles into its normal groove post-pandemic. The media will be full of great stories of perseverance by small businesses in Toronto that have come back strong as people’s lives have changed and evolved but they still crave city life.
