Condos in the Greater Toronto Area appreciated by 44% between their April 2017 peak and June 2021, says realty brokerage Properly.
Interestingly, condos in the GTA struggled through most of 2020, save for before the COVID-19 pandemic and the very end of the year, but they nevertheless managed to subsequently surge in value again.
“This past year, condo sales were hit the hardest by the pandemic. While sales are now back up to pre-pandemic levels, it’s relieving for condo owners to know that their investments have appreciated significantly over time,” said Anshul Ruparell, co-founder and CEO of Properly. “Moving forward, it’s forecasted that solid growth in condo sales will continue as pandemic restrictions ease. I anticipate we’ll see people coming back to the city centre and back to our incredible city that offers world-class dining, entertainment, and liveability.”
There’s a host of reasons for rapid appreciation in the condo market, beginning with the price spread between low- and high-rise housing growing too wide beyond most homebuyers’ means. That, in effect, spurred such strong demand for condominiums that there were too few units available for purchase.
“There was a lag in condo pricing for the couple of years prior to 2017, and with that and the slow appreciation from 2014-2017, condos were due to jump in price,” said Alex J. Wilson, broker of record and owner of RE/MAX Wealth Builders Real Estate in Toronto. “You had a growing gap between the freehold and condo markets and the tipping point was affordability.”
The preponderant reason for supply constraints in the condo market is the timetable for developments. Wilson noted that, from the time a project is conceived to delivery, eight to 10 years could pass. Coupled with extremely robust demand for precious few units, values skyrocketed. Additionally, assignments appreciate in the years between their purchase and delivery, and as a result buyers often flip them, which further adds to condos’ surging valuations.
“You can’t just build condos tomorrow; from the launch period, it takes three to five years, but you have to go through zoning and approvals before that,” said Wilson.
The other reason for surging appreciation is most condos are developed in very close proximity to the strongest market fundamentals, namely transit and entertainment amenities. There aren’t any low-rise subdivisions built in downtown Toronto, but there are myriad condo units on subway lines, close to Scotiabank Arena, bars, restaurants, and the highway network. Wilson anticipates that, in H2-2021 or early 2022 when more people return to the city, the chasm between detached homes and condos will grow even wider, pushing the value of condos higher.
“The best market fundamentals drive appreciation and downtown Toronto has amenities, and people will want to live near work so that they can walk there, especially now that the end of the pandemic is near,” said Wilson. “The convenience and lifestyle factors that condos have to offer are they’re relatively maintenance-free, meaning you only have to worry about what goes on inside the unit, not outside.”