GTA Condo Construction Reaches Record High in Q1
Urbanation Inc., the leading source of information and analysis on the GTA condominium market since 1981, released its Q1-2019 condominium market results.
Pre-Sale Launch Activity Drops to 10-Year Low as Construction Surpasses 70,000 Units
New condominium apartment sales were suppressed during the first quarter of 2019 due to a decade low volume of new projects launched for pre-sale, which occurred as construction levels reached a record high. In Q1-2019, a total of 3,073 new condominium apartments were sold across the Greater Toronto Area, declining 26% year-over-year and falling to its lowest level since 2013.
With 90% of all new condominiums in development pre-sold as of Q1-2019, sales were heavily impacted by only eight new projects launched for pre-sale in the first quarter totaling 1,829 units — the lowest volume of new openings since 2009.
Pre-sale launch activity slowed in early 2019 as the spike in new openings in 2017 (32,077 units) pushed the total number of units under construction as of Q1-2019 to a record 71,378 units across 242 projects, rising from 61,555 units (221 projects) in Q1-2018. The increased pressure on new development in the GTA has led to quickly rising construction costs, causing developers to take a more careful approach towards launching new projects, particularly in light of the increased number of project cancellations.
Condo Price Growth Beginning to Slow
Following a surge in prices between 2016 and 2018 that saw pre-sale prices rise by more than 50% during the period, price growth in the condo market began to moderate in early 2019. The average sold index price within all actively marketed projects in Q1-2019 increased by 1.7% from Q4-2018 ($766 psf to $779 psf), which was considerably slower than the 2.9% quarter-over-quarter growth averaged during 2017 and 2018. On a year-over-year basis, the price index for all sold units in actively marketing projects still posted strong growth of 10% and unsold prices grew 9% (to $998 psf), with unsold price growth returning to single-digits for the first time in over two years. In Downtown Toronto where inventory remained exceptionally low, asking prices for available units on the market rose 13% from a year ago to a record average of $1,279 psf.
Despite some early signs that new condo price growth could be starting to moderate, pricing trends for new condominiums continued to diverge from the resale market. In Q1-2019, the average resale condominium price psf declined by 1.2% from Q4-2018 ($691 psf to $683 psf).
While not a completely unordinary occurrence between Q4 and Q1 periods due to seasonal factors, it was the first time resale condo prices declined on a quarterly basis since Q1-2014 (five years ago). As well, year-over-year growth slowed to 3.3% for resale units, which was half the annual rate of growth recorded for Q4-2018 (6.6%) and a significant change in pace from the 10.5% annual rate recorded a year ago in Q1-2018 and the 27.5% rate at the market peak in Q1-2017. Resale condo sales were unchanged from a year ago in Q1-19 at 4,277 units.
Low Inventories to Continue Supporting Prices in the Near-term
The total number of unsold units in development remained low from an historical perspective at 12,232 units at the end of Q1-2019. While rising from a 15-year low of 8,803 unsold units in Q1-2018, available supply in the new condominium market stayed well below the 10-year average of 15,003 units and the high of 20,689 unsold units in Q1-2013.
As of Q1-2019, completed and unsold inventory in newly built condo projects totaled only 249 units, with only an additional 261 unsold units in projects under construction that are scheduled to reach completion by the end of the year.
Similarly, resale market conditions showed some easing in Q1-19 but stayed fairly tight overall, with active listings at quarter-end rising 10% year-over-year to 2,090 units, which was 39% below the 10-year average for Q1 periods and equal to only 1.2 months of supply.
“A particularly slow period for new condo sales activity in early 2019 will give way to a busier second quarter as project launches increase and demand fundamentals in the GTA remain solid. However, it’s also important to recognize that the growth trajectory for condo prices is starting to change and slower rates of appreciation are emerging relative to the past few years”
– Shaun Hildebrand, President of Urbanation.
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