Homebuyers in Toronto that are priced out of low-rise housing will create a surge in condo demand this year — causing prices to go even higher, says a new report from Urbanation.
The real estate research firm says that 2016 was a record year for new condo sales in the city. Condos went so fast, that despite a slew of buildings completing construction, inventory levels still hit a 10-year low.
In total, 27,217 new condo units sold across the Greater Toronto Area in 2016, a 34% leap from 2015. That was also a new record for the city.
Sales pushed down the amount of unsold units in Toronto to 9,932 at the end of 2016 — a 47% drop from the end of 2015, when there were 17,741 units. Back then, the level of demand meant it would take 10 months to sell all the unsold inventory. Now, it’s just four months.
“The demand-supply imbalance was most acute in old Toronto, where unsold inventory plunged by 57% to 3,503 units, or 3.8 months of supply,” Urbanation said in its report.
New condo sales were strongest in the suburban 905 region last year — sales grew 82% to a record high of 8,703 and accounted for 32% of all condo sales in the Greater Toronto Area.
The rush to buy condos is happening for a number of reasons. On Tuesday, the Toronto Real Estate Board said that immigration was one of the biggest factors pushing up prices and driving down inventory in the city.
Younger Canadians who have been locked out of the detached housing market are also adding to condo price pressures. Condos in Toronto have now become the new starter home for many in the millennial generation.
Urbanation said in its report Wednesday that while 2016 was a record for new sales, a lack of inventory this year will lead to a decrease in sales.
But that will also help drive prices even further — buyers could even find themselves locked into the same kind of nasty bidding wars that have plagued Toronto’s single-detached home market.
“Buyers, priced out of the low-rise segment, a surge in rental demand and increased attention from investors are placing downward pressure on condo inventories which will support strong price growth this year,” said Shaun Hildebrand, senior vice-president of Urbanation.