Investment property sales in the Greater Toronto Area had their second-highest year ever at $21.1 billion, but the figure drawing the most attention in Altus Group’s Flash Greater Toronto Area Report is a 40 per cent decline in new homes sales during 2018.
“Total new home sales in the GTA dropped 40 per cent to just over 25,000 units, which is the lowest level since Altus Group started tracking,” reads the report, which was released Friday morning.
“The reduction in sales activity is partially attributable to the more stringent mortgage stress testing that delayed purchases, and a limited availability of single-family product that was affordable to a broader range of incomes.
“With available inventory low in relation to the pace of sales, the average asking price for a new condominium apartment in the GTA rose by 57 per cent in the past two years with the benchmark price reaching an all-time high at just under $800,000 by the end of 2018.”
This pushed sales of new condos back to levels comparable to 2014 and 2015, just as the GTA market was beginning to heat up again. Condo sales set a record in 2017, but the 2018 figures were close to the 10-year average, Altus reports.
Single-family homes take beating
The vast majority of sales remained in the condo market, with 21,330 according to the report. About two-thirds of those sales were within the City of Toronto, reflecting a continuation of the recent trend toward more downtown living.
Single-family homes (which includes detached, link, semi- detached and traditional townhouse units) continued their plunge, from in excess of 20,000 units during 2015 to 3,831 in 2018.
This was reflected most in the 905 area code, surrounding the downtown, where areas such as York Region saw investment property sale declines of up to 45 per cent.
While the decline in sales was dramatic, Altus said it might also be short-lived. The report states more GTA households are planning to buy homes in the upcoming year. Homebuying intentions among renters had plunged in 2017 due to affordability and mortgage financing challenges, but rebounded in late 2018.
“Real estate investment in general had a bit of a quieter year after an exceptional 2017,” said Matthew Boukall, vice-president, data solutions at Altus Group, in a prepared statement. “We expect the downturn will be short-lived, with the rebound in homebuying intentions, the pause in interest rate increases and continued interest in commercial real estate as an investment asset class.”
In 2017, only 13 per cent of renters who responded to an Altus survey said they intended to purchase a home in the upcoming year, but that rose to 20 per cent in 2018.
Other highlights from Altus
Overall across all real estate investment sectors, Altus said the 2018 figure of $21.1 billion (based on transactions of more than $1 million) was an 11 per cent decline from 2017. There were fewer transactions, but higher dollar volumes per transaction.
Here’s an overview of the GTA’s performance, by sector:
* The residential land market dropped 34 per cent from its record 2017, to about $2.6 billion. Total land sales (ICI, residential and lots) dropped to $8.5 billion although ICI land by itself set a record. ICI investment was led by the $825-million purchase of the former Downsview airport property by the Public Sector Pension Investment Board.
* The apartment sector was a star performer in 2018, posting both the highest dollar and percentage increases, with $2.7 billion in sales.
* The office sector set a new record of $4 billion, boosted by the $850-million Dadco Investments purchase of a 50 per cent interest in the Bay Adelaide Centre.
* The industrial market saw about six million square feet added across the GTA, up from about 4.5 million a year earlier. Demand continues to outstrip supply, and Altus reports the vacancy rate below one per cent.
* Office space completions dropped to a 15-year low, with only 650,000 square feet of new space added to the GTA leasing market. Absorption hit about 3.9 million square feet. Altus says about 11 million square feet of new space is under construction.