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The Toronto Condo Market is poised to continue to increase in pricing. According to Urbanation, the five year average for increase in pre-construction pricing has been 8.1%, this has been followed by a five year average increase in the resale market of 7.5%. To judge where prices are going in the future we have to look at supply and demand.

Demand of Toronto Condos

On the demand side, condos are attractive on the affordability front. The RBC Affordability Index measures the following:

Median pre-tax household income required to service the cost of amortgage on an existing housing unit at going market prices, including principal and interest, property taxes and utilities; the modified measureused here includes the cost of servicing a mortgage, but excludes property taxes and utilities due to data constraint in the smaller CMAs. This measure is based on a 25% down payment, a 25-year mortgage loan at a five-year fixed rate and is estimated on a quarterly basis. The higher the measure he more difficult it is to afford a house.

From the report we see the following:

  • Toronto Detached Homes require $107,100 in household income
  • Toronto Standard Two-Storeys require $126,000 in household income
  • Toronto Standard Condos require $70,400 in household income
This data shows that condos are the natural affordable choice for people, and judging the fact that the number of households forming that live in apartments vs. a low rise home is expected to rise, expect condo demand to be high in the future.

Supply of Toronto Condos

On the supply side, the pre-construction units that were bought a few years ago are coming on stream and entering into the resale market. Since pre-construction units were increasing faster, the price difference between resale and pre-construction has become quite large (almost a $162 psf according to Urbanation).As these units enter the market, investors will only sell if they make a profit or at minimum break even, and when these units enter the market they will naturally cause the market to go up.
This doesn’t mean that your condo will automatically go up at the same rate, it just means because more higher priced units are entering the market bringing up the averages.
Here are some projects that are expected to bring up the averages of the area that they are in, mainly because the lack of resale supply:
Monde: Built by Great Gulf, has 40 floors and 516 units. Designed by Moshe Safdie with interiors by Cecconi+Simone. Located at the East Bayfront in the Parkside Development. There are no existing condos, so going from 0-$700psf is a big jump. I really like this project.
297 College St: By Tribute communities at College/Spadina (in Computer Alley, next to U of T). 15 Storeys and 234 units. Great for students and will hold a Loblaws, this project is going to be really interesting, I can’t wait to see the pricing do some analysis. Like Monde, walking around College/Spadina you will see very few condos and no new projects.

197 Yonge St: Set to be 60+ Storeys and lots of units, there are very condos around Queen/Yonge. This project is going to be hot one with Asian and Iranian investors and is expected to be $700psf+ in pricing. Yonge St has no condos nearby, so any project will cause a huge jump.
Keep looking at the fundamentals. Happy Investing