Photo: James Bombales
While home prices continued to underperform across most GTA property types last month, there was one notable exception — the benchmark price of a new condo jumped a whopping 25.4 per cent year-over-year to $758,370 in May.
“Besides strong demand from new home buyers looking for more affordable options, the continuing increase in condo…prices can be partly accounted to an increase in average unit size to 892 square feet from 814 square feet a year ago,” reads the data release from the Building Industry and Land Development Development Association (BILD). “The average price per square foot [increased] to $850 from $743 last year.”
But larger units aren’t the only reason for the price bump, according to Fox Marin Associates broker of record Ralph Fox.
“There’s been very low inventory when it comes to new construction condos for awhile now,” he tells BuzzBuzzNews. “When units come on the market, they go for very high prices.”
Fox does agree with BILD’s statement that buyers priced out of the low-rise market are likely looking to condos instead, a surge of demand which could account for the uptick in prices. But he also notes that the new construction condo market is driven largely by investors, who have other considerations in mind.
“Investors are thinking long term when it comes to the new construction supply pipeline,” he says. “With the end of the OMB, there’s a lot of speculation that there will be fewer projects in the pipeline in a few years. Developers will likely take a “wait-and-see” approach in the future, and if supply lowers considerably, that could drive new condo prices up further.”
Still, he says it’s hard to predict whether the market will continue to see such large year-over-year price gains, because it’s largely dependant on the number of condo launches in any given month.
“There were only five launches last month, so that’s going to skew numbers,” he says.
Zoocasa managing editor Penelope Graham agrees, saying that, while the new condo market was certainly hot last month, there’s no guarantee it will continue to be moving into the summer.
“It’s hard to say with the preconstruction market, because it tends to be really seasonal,” she tells BuzzBuzzNews. “Two or three months down the road you could see a lot of projects come to fruition, which could change the price picture.”
But both she and Fox agree that prices are likely to stay relatively high for the foreseeable future.
“I think the new condo market is going to mirror the resale condo market, in that prices are going to continue to rise,” says Fox. “In terms of affordability, there’s a lot of demand for condos on the market right now.”