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.