Demand for new condos in the Greater Toronto Area was especially strong in 2021, as the latest numbers show condo sales reached their second-highest level of all time, reflecting an impressive resurgence from the pandemic’s initial impact.
The year-end 2021 Condominium Market Survey from Urbanation reports a total of 30,844 new condo apartment units sold, marking an increase of 69% from 2020, and just below the huge construction boom of 2017, when a total of 31,216 traded hands -- the largest volume since the real estate consulting firm began tracking the market in 1981.
Read: GTA Rental Construction Activity Surges to 30-Year High as Vacancy Rates Approve
Growth was especially notable in the last quarter of the year; a total of 8,361 units sold, up 77% from the same time frame in 2020 and indicating the strongest Q4 of all time. Overall, transactions for the year and quarter clocked 43% above the 10-year average.
New Supply Sees Turnaround From a Slower 2020
The numbers show the pre-construction segment has roared back; early 2020 pre-sales took a tumble at the onset of the pandemic, as lockdowns forced launches to delay or shutter altogether, leading to a four-year low in new openings with just 18,003 units started. That turned around significantly last year, as 92 projects -- totalling 26,835 units -- were brought to market, up 49%. It was also the third-highest year in terms of new supply behind 2017 and 2011, when 29,529 and 28,448 units were launched, respectively.
This influx of new supply was met with voracious demand, hitting a new record with an 85% absorption rate -- well above the 10-year average of 66%. Available units are flying off the proverbial shelves, as 85% of projects sold at least 70% of available inventory within a time frame of 2.6 months (based on an average project size of 270 units).
Demand was even more fierce in Q4, with 76% of all new units sold, compared to 55% at the end of 2020.
A Persistent Supply-and-Demand Imbalance
Like the resale market, the new condo space is feeling the squeeze of especially tight supply and rampant buyer competition, as the number of 2021 condo sales outpaced new launches by more than 4,000 units, eating into unsold inventory levels by 26% year over year. Just 10,422 units remained available at the end of the year, a 14-quarter low, and equivalent to 4.1 months of supply. From a long-term perspective, that falls 31% below the 10-year average, and is well below 9.3 months of supply, the benchmark for this time of year.
Conditions were especially tight in the 905-area markets, with a low of 2.4 months of inventory, while the City of Toronto sits on 5.7 months.
Such a dearth of supply has effectively pushed prices higher for new units, averaging $1,322 psf in Q4, an increase of 18% year over year -- the fastest pace of growth since 2018.
And, as has been the trend over the pandemic, prices are especially booming in the 905, up 23% annually to an average of $1,080. However, that’s still a comparable price point to the 416 market, where the average unit price rose 17% to $1,429 psf.
Shaun Hildebrand, President of Urbanation, says buyers can expect fierce competition to linger within the first half of 2022, but that the market could ease in the latter six months as new supply comes online and borrowing costs rise.
“Even with a large increase in new condo project launches in 2021, demand continued to outpace supply, leaving the market with exceptionally low inventory and surging prices heading in 2022,” he says. “With resale supply also scarce, expect competitive market conditions to sustain in the near term. However, by the second half the year, interest rate increases, record condo completions, and policy changes that likely target investors should lead to more moderate levels of presale activity.”
