In this article, we are going to discuss pre construction condos Toronto in terms of what we know about pre-construction and what is really happening in the GTA market in Southern Ontario.
Why Pre Construction Condos Toronto Are Better: Reason 1
If condos are already growing at 20% per year, does this segment have the potential to grow to 30-40% by the end of 2022?
The difference between single-family homes and condos is the largest we’ve seen since 2016, and 2017. Although some people argue that condos are incredibly undervalued but I think they’re already far from affordable. Some think people going back downtown to work, is going to be a big driver for price increases next year, actually we’re at a point where the median price for a one-bedroom is $700,000, which is already very difficult for first-time homebuyers to get into the market. I strongly believe that there will be a certain level of difficulty, simply because of the income and affordability for the first time buyers. I don’t know where that level of affordability is for first time buyers. Compared to Manhattan, for example, we’re at a much healthier multiple of median income versus home price. So if the limit is an income limit, we’re not there yet. The likelihood of a rate hike has come down tremendously in the last couple of weeks, given what’s happened in the stock market.
Why Pre Construction Condos Toronto Are Better: Reason 2
But, it also begs the question: will this stock market uncertainty affect real estate? Real estate has a certain correlation to the stock market. We’ve seen this before. The question is: to what extent is real estate influenced by the stock market?
Prices of downtown condos are already up more than 10% in the first month of 2022. I think they’re far from affordable, but I see even more growth. Although I don’t think we will see a 40% price increase by the end of 2022, 30% is very possible. We know that in the real estate market, 72% of the prices are under $800,000 now. That doesn’t mean that just because you own a condo, it’s going to go up 30% this year. There are a lot of other variables to consider.
I think the markets are also very fragmented. If you look at CO1, the downtown core has increased 20% since January 2021, which was still a low point of the market in that year. But back in 2020, the pre-covid peak of the market only increased 4% on average. If you look at individual buildings, like Harbour Plaza or 10 York, they have increased by 20% from their peaks. That’s why it’s interesting to see how some buildings spike and some don’t.
Why Pre Construction Condos Toronto Are Better: Reason 3
Many of these beautiful buildings that are less than 5 years old and are on high floors overlooking the water are selling for crazy prices. Is this happening everywhere now? Or is it just in the $1,400 to $1,600 per square foot segment?
It seems to be very fragmented. There are still a lot of good deals out there. When we look at some of the condos in Fort York and even Liberty Village, I still see thousands of feet in some decent units, maybe $1,100 per square foot. But there are a lot of good deals and condos prices haven’t changed much. For example, the lake view condos in Humber Bay, I just saw $1,660 a foot for a condo in the Odessa building. I didn’t know that Humber Bay condos can be another Yorkville.
It’s interesting because if you look at other parts of the market that have gone from 70% to almost 100% in the last two years, this is part of that. The condos in these area started from $600,000 and went up to over $1 million, where other buildings are already expensive. But like 10 York and Harbor, it’s not like they started cheap and got there. They were already at the top price category.
Why Pre Construction Condos Toronto Are Better: Reason 4
How far are we from $2,000 per square foot being the norm for a pre construction condo Toronto? Not just for Yorkville, but for other ultra-luxury projects. Many people are asking how far are we from $2,000 a square foot? Is that realistic?
I think a lot of people like to use the $2,000 a foot as a benchmark for pre-construction because they look at the Sky condos at Spadina and Bloor. They look at 33 Yorkville. These are some of the most prestigious projects that have come out in the last couple of years. But you can’t take that and apply it to the whole market. What you can do is compare a $2,000 per foot, pre-construction condo in Cielo to 1080 Bay, where studios condos with no parking are selling for over $1,600 per foot, sometimes up to $1,700 a foot. In a building like 1080 Bay, the 1+1 and dens and studios are already selling for less than 20% of $2,000 a foot. But it’s not that we don’t see these figures. There was a unit in Hazelton that just sold for more than $1,800 a foot. Now, of course, it’s a ballet building. It’s a very specific type of condo for a very specific type of buyer. But 1080 Bay is a project with good amenities in a good location by a good developer. Yet it sells for $1,700 a foot. So I don’t think we’re as far off as some people think.
If we look at history, let’s go back to the last 20 years of pre-construction condo prices. In the early 2000s, pre construction condos Toronto weren’t very expensive, but they were much cheaper than resale condos because you took the risk of buying them new. By 2010, they were almost the same price. From 2013 to 2015, pre construction condos Toronto really started to take off and are even more expensive than resale condos.
From 1990 until now, pre-construction condos have always been more expensive than resold condos, based on average price per square foot. The gap has widened and narrowed over the years. But in the past, you could find many more deals where you could find pre construction condos Toronto at or below resale price. Today, it’s incredibly difficult to find a pre-construction condo that sells for the same price as a resale condo, and almost impossible to find one that sells for less than resale. Unless it’s a project that started years ago and has not gone up in price for some reason.
Right now, the biggest gap, on average, that we’ve seen between pre construction condos Toronto and resale condo prices, is very building specific. Tridel’s Westerly II building was launched at Islington and Bloor in November of 2020 for $1,050 a foot. There were resale condos that were comparable in the Islington Terrace buildings next door, which are also a Tridel building at $1,150 a foot. Tridel could have easily sold condos for $1,250 a foot, but 10 to 12 of our customers bought in that building for just over $1,000 a foot. So there are exceptions to the rule, but in general, pre construction condos Toronto have a higher price than resale condo prices this year.
To read part 2, click here 《Why Pre Construction Condos Toronto Are Better, Part 2》
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