Anecdotally, we’ve been hearing how strongly sales of condo units in Toronto bounced back in the first quarter of 2014. Investors swarmed some condo sales centres as soon as new projects were launched. In the resale market, some sellers were choosing among competing buyers for the first time in a long while.
Data this week from Urbanation Inc. puts some numbers to the rebound: The market research firm says sales of new condo units soared 88 per cent to 5,140 in the first quarter, compared with the 2,728 sold in the first quarter of 2013.
Urbanation senior-vice president Shaun Hildebrand cautions that the jump in sales is off of a particularly depressed level in 2012. He finds it more meaningful to look at the five-year average for first-quarter sales. In that comparison, the 2014 number is 5-per-cent higher than the five-year average.
“It’s sort of a rebalancing of the market,” says Mr. Hildebrand.
When Mr. Hildebrand talks about the new condo market, his data encompasses projects that haven’t broken ground yet all the way to those that are move-in ready but still have units sitting in the builder’s inventory.
The new condo market had a lot of momentum all the way through 2011 and into 2012, before that year ended in a slump following the tightening of mortgage-lending rules. Many developers put projects on ice in 2013.
“The market has been very volatile over the last four years,” says Mr. Hildebrand.
But many investors felt renewed optimism in the opening months of 2014, says the analyst – partly because a robust resale market has helped to create an overall sense of stability. The mood was so buoyant that some openings were pulled forward from their scheduled launch in the spring.
“I think that a lot of people were expecting something terribly bad to happen in the market in 2013,” says Mr. Hildebrand.
Meanwhile, lots of developers were offering enticing incentives. Some reduced deposits, some did away with assignment fees, while others offered up to $30,000 cash back on a sale. Some builders capped the development levies that can be passed on to unit-holders at closing.
Mr. Hildebrand points to new projects such as Core Condos on Shuter Street and YC Condos on Yonge Street, which both reported strong sales very early in the year. That success encouraged other builders, he says.
“Really, developers are quick to respond to changes in the market that they see.”
For the most part, investors continue to do the bulk of the buying in the new condo market, says the analyst, who adds that they favour central locations and buildings along transit lines or on well-known streets.
He estimates that prices in the new condo market have retreated to approximately the level of two years ago.
At the same time, the overall resale market was blazingly hot in the opening months of 2014. In the 416 area code, the average price for a detached house in April hit $965,670 for a 13.2-per-cent jump from April, 2013. The average semi jumped an even more eye-popping 18 per cent in the same period to $702,332 from April of 2013. The average price for a resale condo unit in April was $384,758, which was a slim 1.8-per-cent increase from April of 2013.
Mr. Hildebrand says Urbanation data backs up the anecdotal tales from real estate agents who say that many buyers priced out of the single-family home market are turning to two- and three-bedroom condos instead. Prices of resale condos had slipped during 2013 and that made the prices of older units even more attractive compared with single-family dwellings and shiny new condos.
Indeed, says Mr. Hildebrand, the fastest-growing segment of resale condos in the first quarter was in buildings registered before 1990.
Lots of empty nesters are moving out of their large houses and into condos, says Mr. Hildebrand. In many cases they prefer the diversity and space available in the established buildings.