July 28, 2022
Market Trends
RYPM
Prospective homebuyers — particularly first-timers — looking
for a foothold in today’s housing market found a better balance in the condo
segment this past spring, as sales dropped and long-term inventory
significantly improved.
The Q2 stats released by the Toronto Regional Real Estate Board (TRREB)
reports a total of 5,687 condo units traded hands between April and June,
representing a year-over-year decline of 35.2%. Meanwhile, the supply of new
listings stayed relatively flat — a total of 14,316 came to market, an annual
difference of -0.9%. That’s led to a 27.5% surge in active listings, with total
inventory clocking in at 5,210 at the end of the quarter.
The average selling price of a unit rose 12.2% from the same
period in 2021 to $769,999, with the strongest price appreciation in markets
outside of the City of Toronto core, especially at the sub-$700,000 price
point.
Durham Region experienced the strongest price growth, up 25.5% YoY to an
average of $645,327, followed by Peel Region, up 18.7% to $673,051. The CoT,
where unit prices are the highest at $795,560, saw an increase of 10.2%.
TRREB President Kevin Crigger says that the condo segment
has been more resilient than other home types following recent
interest rate hikes from the central bank, which have whittled borrowers’
buying power.
“While some would-be first-time buyers have temporarily
focused on renting as they sit on the sidelines, the less expensive entry
prices of condos versus freehold homes has provided an alternative option for
purchasers looking to mitigate the impact of higher borrowing costs,” he says.
“The lower average price point in the condo segment has performed better than
many low-rise segments of the market since the onset of the Bank of Canada rate
hikes in the spring.”
Dividing the number of sales by the number of new listings
reveals a sales-to-new-listings ratio of 38.7% in the GTA, officially dipping
into buyers’ market territory. According to the Canadian Real Estate
Association, this measure indicates balanced conditions within a range of 40 –
60%, with below and above that threshold reflecting buyers’ and sellers’
markets, respectively.
“Condo market conditions became more balanced in the second
quarter, with buyers benefitting from substantially more choice. However, the
pace of annual average price growth remained above the rate of inflation,
particularly in areas outside of Toronto that are offering attractive price
points,” says TRREB Chief Market Analyst Jason Mercer.
Condo Rentals Continue to Tighten Dramatically
In contrast to the ownership market, condo apartment rental
conditions are becoming even more competitive. According to TRREB, the average
rents for one- and two-bedroom apartments have hit new records, even surpassing
the pre-pandemic peak recorded in the third quarter of 2019.
The board says there were 13,203 condo apartment rental
transactions made through the MLS System in Q2 2022 – down 11.4% compared to Q2
2021. However, the decline isn’t due to less demand; a dearth of rental
listings, which dropped nearly 30% from last year, is the culprit behind fewer
leases. “With less choice, it was much more difficult for renters to get deals
done,” reads TRREB’s report.
Crigger says that as higher mortgage rates have knocked more
would-be homebuyers out of the market, they’re flooding into the rental space,
putting immense pressure on supply. Prospective tenants will see lease prices
soar in the near term as this trend plays out.
“Expect rental market conditions to tighten further in the
coming months,” he says “Higher borrowing costs may have temporarily precluded
home buying for some households, but the Greater Toronto Area (GTA) population
continues to grow alongside a booming regional economy. This means that an
increasing number of people requiring a place to live will turn to the rental
market.”
Average condo rents rose by double-digit percentages across
the board, for all bedroom types, in Q2; one-bed units now fetch 20.2% more YoY
at $2,269, with two-bed unit rents up 15.3% to $2,979.
“Competition between renters continues to heat up, resulting
in extremely strong upward pressure on average rents. Rental supply remains a
major issue in the GTA and will become more pronounced in the short term, as an
increasing share of well-employed individuals turns to the rental market.
Policymakers need to develop a diversity of options to bring more rental supply
online, whether we’re talking about investor-held condominium apartments or
purpose-built rental developments,” said TRREB Chief Market Analyst Jason
Mercer.
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