During the second quarter of 2020, new condo sales in the Greater Toronto Area (GTA) dropped to their lowest levels since 2009, according to recent data released by Urbanation. However, both condo prices and construction increased in Q2, despite the province being nearly completely shut down due to the COVID-19 pandemic.
Drop in New Condo Sales
A total of 1,385 new condo apartment units were sold in the GTA during the second quarter of 2020, which Urbanation noted was the lowest level of sales activity since Q1 2009 (during the recession), when 885 units sold were recorded.
Additionally, the second quarter marked an astounding 85% year-over-year decrease in new condo sales as a result of only six projects and 1,176 units being launched for presale. By comparison, 40 projects and 11,415 units were initiated in the same quarter a year ago.
In an interview with The Star, Pauline Lierman, Urbanation’s director of market research, said Q2 is normally a busy one.
“When we got into Q2, COVID hit, everything from the second half of March fell to the wayside, for everybody. The market was stagnant, nobody really knew what was going on.”
Lierman did note that there was a sort of silver lining, as the market began to bounce back by the end of the quarter. She pointed to incentive programs, like flexible down payment terms for buyers, as being part of the reason things have improved.
High New Condo Prices
For projects launched in Q2 alone, selling prices reached an average of $889 per square foot, compared to $1,159 per square foot for new releases in Q1 2020. This reflected a lack of launches in the higher-priced downtown Toronto condo market.
Overall, new condo projects that were being actively marketed throughout the GTA in the second quarter averaged $867 per square foot, up from $864 per square foot in the first quarter and 8% more year-over-year. Urbanation noted that this was a record high in terms of pricing.
Sales were able to continue thanks to the shift towards a virtual format, many projects moving into the construction stage and condo inventories remaining low. As a result, developers began gaining more confidence.
In Q2, 90% of all new condo units being built in the GTA were pre-sold, higher than the 88% from the second quarter of 2019. What’s more, the supply of unsold units decreased by 19% year-over-year to 12,778 units and dipped 17% below the 10-year second-quarter average of 15,468 units.
Urbanation said it expects to see improvement in new condo supply in the third quarter. Due to the success of recent new launches and the resale market’s stability during the pandemic, some projects that had previously been delayed until fall have now been scheduled for the summer. So far, during Q3 (as of late July), 2,137 units have been launched.
The second quarter of 2020 brought an increase in unit construction too, even though the government had required developers to stop building for part of Q2 to slow the spread of COVID-19. There were7,388 units started in total, which marked a 45% increase compared to the same time last year.
According to Urbanation, this growth in condo construction is driven primarily by the 905 region which had a record high of 24,690 units compared to 17,764 units in the second quarter of last year. In the downtown markets, however, the number of condos under construction decreased from 39,027 units in Q2 2019 to 34,990 units in Q2 2020.
Lower inventory and buyer incentives could help drive the condo market forward as the GTA continues its efforts to deal with the pandemic. Things appeared to have picked up at the end of the second quarter and the third quarter could see continued recovery, provided the health crisis is kept in check.
Source: The Star