Toronto Condo Market Growing with Rising Prices
Toronto has retained its reputation as the most pricey market for buyers and renters in Canada. And it’s becoming a tough market for landlords, property managers and investors after generating record returns in previous years.
The June report published by the Toronto Real Estate Board shows sales dropping yet with condo and apartment prices rising at a good clip.
In fact with a dearth of houses and condos for sale, home prices are too high for all but the wealthiest buyers in and around Toronto. Condos comprised 80% of all new home sales in Toronto. They’re all looking to the condo market for ownership opportunities. Yet everyone wants a condo close to where they work. Toronto has long commuter times that rival California and New York.
Home prices are expected to continue to rise. That will support a strong rental market as covered in our Toronto condo rental market report. But is Toronto one of the best cities to invest in rental properties?
What are we to make of the situation in Toronto? Why are investors so eager to buy here in conditions that you’d only see in New York or San Francisco Bay Area? If not for Ontario’s foreign buyers tax, prices would be even higher in Toronto.
How long will the condo shortage help investors maintain their yields and improve property values? According to a report by CIBC, in 2017, the average resale price of a condo rose by 26% and rents grew 9%. That’s created “exceptional ROI” of approximately 155%. CIBC says some investors were receiving an average net unit income of $360 per month.
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Last month, condo apartment sales dropped by 6% in the 416 Toronto area code, while prices fell 3.6% outside Toronto. The situation has changed in the city in 2018. Capital appreciation might be very low going forwar and many investors are struggling to remain cash flow positive.
The tide has turned for rental income property owners and speculators. Now it’s vital to optimize the cost side with the use of property management software and strategies to minimize property management work.
New Construction is Flooding The Toronto Condo Market
The reason for this might be a large quantity of new construction condos becoming available. for property managers and condo investors, this is a rare opportunity to buy or manage them.
“Seller’s market conditions for condominium apartments remained firmly in place in the first quarter of 2018. Strong competition between buyers underpinned price growth well above the rate of inflation. We expect the condo market segment to remain strong through the remainder of 2018 and over the longer term, as buyers continue to see ownership housing as a quality long-term investment,” said Tim Syrianos, President of the Toronto Real Estate Board.
Condo Prices Quarter to Quarter
Condo prices rose $34,000 from last quarter 2017 to first quarter 2018. With July’s prices up more than 3%, 2nd quarter 2018 prices could show an even larger quarterly increase.
As you can see in this chart, 60% of apartment listings sell each month. A rising volume of apartment rental stock comes in the form of high rise developments in the city of Toronto proper, particularly downtown.
|Sales||Average Price||New Listings||Active Listings|
The market has been hampered slightly by new, tighter mortgage rules which have cut a good number of younger buyers out of the market — hence continued demand for rentals. Although there is a record breaking number of new builds including big multifamily units, the political atmosphere for development in Toronto isn’t good. Supply will always be an issue.
With traffic congestion, commuting delays and strong job growth in downtown Toronto, young buyers are more interested in living here. The waterfront is a big attraction.
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