New suburban condos just outsold the 416 for first time ever

Over half of the new condos sold in 2020 in the GTA were located in suburban “905” areas of the region — a first in the several decades that market data has been collected.

There were 9,288 new condo units sold by home builders last year in the 905, enough to narrowly beat out the 8,959 units sold in the City of Toronto. The 2020 sales total for the 905 was the third-highest ever recorded behind only 2019 and 2017, according to new data published today by Urbanation.

Meantime, new condo sales in the City of Toronto were down 38 percent compared to 2019’s total, a 15-year low for the market.

The strength in the suburbs was far from enough to make up for the weakness in the core as overall new condo sales for the Toronto region were down by 28 percent. It was the lowest annual total for the region since 2013, Urbanation said in a media release.

From a quarterly perspective, it was a volatile year for new condo sales. Activity in the typically busy second quarter was decimated by pandemic-induced lockdowns and economic uncertainty. New condo sales bounced back for a record-setting third quarter before simmering down for a lacklustre final stretch, with fourth quarter sales down 43 percent from the same period in 2019.

Urbanation said the full-year sales total was in line with the number of new condo launches recorded in 2020. There were 18,004 units brought to market last year, significantly lower than 2019’s 25,296 unit total.

“The GTA new condominium market recorded a respectable number of sales in 2020 as the industry pivoted to a virtual sales environment amid lockdowns caused by COVID-19,” said Urbanation President Shaun Hildebrand.

“The shift in activity to the 905 region accelerated last year as demand for relatively affordable suburban sites intensified alongside the broader real estate market,” he added.

Home builders may have been more hesitant than usual to launch new condo projects last year, but when it came to construction activity, they were firing on all cylinders. There were 26,662 units that began construction in the Toronto region in 2020, the second-highest result of record and up nine percent from a year earlier.

According to Urbanation data, there were 81,029 condo units under construction in the region by the end of 2020, another record-breaking figure.

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For the first time ever, there were more pre-construction condos sold in the 905 area than Toronto last year

Smaller apartments with big appeal for investors helped the 905 areas outside the city dominate the Toronto region’s 2020 condo market in a trend that is expected to continue in 2021, said Shaun Hildebrand, president of market research firm Urbanation.

Last year was the first time that 905-area condos eclipsed pre-construction sales in the City of Toronto with a 51 per cent share of the 18,247 units sold. But the overall number of new launch sales was 28 per cent below 2019 sales, according to a year-end report released on Monday.

Sixty per cent of the condos launched last year were one-bedroom and studio apartments, compared to 53 per cent in 2019.

In the City of Toronto, developers were selling bigger condos — 706 sq. ft. on average compared to 676 sq. ft. the year before. But in the 905 markets, condos shrank down to 688 sq. ft. compared to 715sq . ft. the previous year.

That’s partly an indication of the GTA’s affordability challenges, said Hildebrand.

“I’m sure developers would love to sell larger units but the market for larger units is smaller because of higher price points,” he said.

Investor-focused projects tend to be smaller, he said. Eleven of the top 20 selling launches last year were in the 905 with one near the Vaughan Metropolitan Centre subway selling units less than 600 sq. ft. on average.

“With interest rates at rock bottom lows and stock markets looking pretty frothy, I think people are looking for a place to invest and the 905 condo market has been a safe place,” said Hildebrand

He cited less dramatic rent declines in the suburbs and increased resale prices. Investing in a new condo in Toronto was more challenging with resale units selling for 10 per cent less than they did pre-pandemic and rents declining 17 per cent.

The 905 has traditionally been an end-user market and the popularity of condos there reflects the outflow of population to secondary GTA markets, said Hildebrand.

Vaughan, Oakville, Mississauga and Thornhill all saw substantial sales from both investors and buyers who plan to occupy their units. Those submarkets offer “a significant discount relative to downtown Toronto,” he said. Transit such as the Vaughan subway and the coming Hurontario LRT are adding to the appeal.

There is less condo activity in the outer areas of the 416 area code, such as North York, Etobicoke and Scarborough.

“Prices are expensive relative to rents and resale prices. The price difference between a new condo and a resale condo is over $400 per sq. ft. That’s increased since the pandemic by $130 per sq. ft. because new condo prices have remained at historic highs whereas we saw some decline in the resale market,” he said.

 

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