The New Condominium Construction Market for the Greater Toronto Area in 2022

Although it is a new year, early indicators imply that the already robust Toronto condo market will be much stronger in 2022, possibly breaking records. The stagnation that many market analysts feared at the start of the pandemic never materialized. Developers, realtors, and purchasers have continued to report an increase in housing demand. While some continue to expect a decline, the reality of Toronto’s booming condo market boils down to the most fundamental economic principle: supply and demand.

At the beginning of the pandemic, the city center emptied out, as there was a massive flight to the suburbs and beyond. There was no need to be downtown anymore because the nightlife, entertainment, sports, and other events were no longer accessible, and going into the office was no longer necessary as shared office space was shuttered and non-essential employees transitioned to remote work.

However, that flight to the suburbs is over now, and people are starting to return to the downtown core—especially since covid restrictions have largely been lifted. An uptick in sales has begun, even before corporations make significant pushes for their employees to return to the office. This trend is expected to increase, with the downtown core—particularly on the rental side—outperforming over the following six months.

Why are so many Toronto Condos being built?

As the affordability of low-rise houses declines for the majority of people, individuals are naturally drawn to the more affordable option: condos. The price disparity between low-rise homes and condominiums continues to widen, resulting in a large price difference.

One reason for this gap is immigration, which fuels the Canadian economy, keeps us culturally and socially dynamic, and keeps Toronto developing and thriving. Despite the pandemic, Canada welcomed a record-breaking 401,000 new permanent residents in 2021, and that figure might rise to 411,000 in 2022 to achieve the government’s aggressive immigration ambitions.

According to Statistics Canada, immigrants prefer to live in big metropolitan areas such as Toronto. Statistics Canada is also estimating we will welcome nearly 1 million foreign students in 2022, with 49 percent of them attending university and in desperate need of rental housing.

Furthermore, it is estimated that over the next ten years, Toronto would need to build more than one million homes to keep up with demand. As Ontario only permits a maximum of 40,000 houses to be built per year, our chronic shortfall is unlikely to be remedied anytime soon.

How many condos are being built in Toronto in 2022?

“New pre-construction projects planned throughout the early part of 2022 total 7,684 units, which is more like a strong second-quarter slate of expected openings,” Ms. Lierman explained, creating a selling buzz comparable to the first quarter of 2017 — a record year for GTA pre-construction sales.

This rapid start is excellent news for both buyers and investors, as the pandemic in 2021, as well as the constraints inflicted on the building sector, resulted in a halt in the number of condominium apartments and purpose-built rental units, with just 17,865 units being completed in such a long-time span.

Condo construction in the Greater Toronto Area reached an all-time high in the first quarter of this year. In the Downtown Toronto area alone, over 100 cranes are being deployed to construct numerous structures, to meet the ever-increasing demand for housing.

How much do the new condos cost in Toronto?

As of April, the average price of a condo in the GTA was $808,566 while it was $831,351 in the City of Toronto. Condo prices in Toronto continue to grow, as has pretty much everything else recently, as more and more potential homeowners turn up to the sky for less expensive alternatives to detached residences.

In February, the price difference between a detached and a condo home in Toronto was 1.2 million dollars, according to the Toronto Real Estate Board. However, it is beginning to correct downward in the future months, as the average detached in the 416 regions in March is down to 1.92 million from almost 2.1 million, while the average condo is up to 831 thousand dollars from 822 thousand dollars.

As a result of the moderate increase in condo average price and the minor correction in detached average price, it is predicted that the difference would reduce over time. However, to limit these gaps, buying power is artificially decreased by regulation, as it was in 2017, and as it is again this year with rising mortgage rates.

It is eminent that buyers purchase not only on the basis of the overall price but also on the basis of the monthly payment. People’s buying habits are most likely to shift in response to changes in mortgage rates, which significantly alter monthly payments.

As pricing will continue to be influenced by the degree of demand. “Pre-construction appreciation in downtown Toronto had slowed,” Ms. Lierman conceded. “However, with several developments in the downtown Toronto market attaining above $2,000 psf (the recent project launch was about $1,400 psf), it would not be shocking to see the typical launch in central Toronto begin to push new pricing levels once again.”

Inside the Condo Market in the GTA 2022

Many people saw their life savings evaporate while attempting to weather covid; whether they worked in the service industry, tourism, sports, or entertainment, their employment just vanished overnight. Many others, on the other hand, saw their fortunes expand dramatically. When covid first emerged, the stock market crashed, but it has since doubled in value.

The average house price in Toronto has increased by more than 30%, bitcoin has increased in value from $5,000 to over $45,000, and many sports and trading cards have more than doubled in value, indicating that there is a lot of money out there, and it’s beginning to be seen in the high-end condo market, which has grown faster than the overall market.

Let’s take a look at one of the largest condo buildings downtown College Park at 763 Bay, which is 51 floors tall and contains 655 units, assuming naturally that there would be a handful of units available for sale. There are currently no one-bedroom apartments available. There have only been 42 sales in the previous two years. Because of the shortage of inventory, prices have inevitably risen.

The price of a one-bedroom apartment in the building has risen by around 10% in the previous 16 months. The true story, though, is how much one-bedroom plus den apartments in the same building are valued; they are up around 19%. This statistic is solely tied to the requirement to work from home. If you are purchasing a new apartment, it must include an area where you can at least set up a desk for workspace. As for a one-bedroom, or a one-bedroom plus den, both are unquestionably far more popular in demand from a rental and resale standpoint.

The Current Rental Market Situation in 2022

Looking at the downtown rental market, the supply of condominiums available to rent was just over 2000 units by March, which was approximately the same availability as the previous month; however, the number of condos actually rented in February was quite comparable to January, at just under 1500 units. This demonstrates that demand and supply have stayed constant and that the market has begun to settle.

However, there is now just under a two-month supply of goods, which is extremely low. Rent rates are projected to rise steadily as a result of this. When looking at market trends, especially non-rent control buildings, it is possible to identify what is going on in the market.

During covid, many people negotiated rent reductions or moved into other units because they could find lower-cost housing. Rent controls have now been lifted for properties built or registered after November of 2018. Tenants anticipate that such properties will experience a rise of at least 5%, potentially nearing the double-digit market.

Those properties built or registered before November 2018 will experience a 1.8 percent rise because that is what the provenance guideline indicates, and most of those landlords can raise the rent. These apartments will skew market data downward, so if you see an average rent of 3%, it’s actually considerably higher because of the rent control buildings.

Something to think about regarding the rental statistics in February. Over 70% of the units rented were one-bedroom or one-bedroom plus den homes, which remain by far the most popular units to rent in the downtown market, with an average price ranging from $2090 to $2310. Two bedrooms accounted for 21 percent of the whole market, while three bedrooms accounted for only 2 percent, with typical rents hovering at $2,999 and $3,700, respectively. As a result, there is a lot of potential for increasing market share in the near future.

Future Market Expectations for 2022

The necessity of the pre-construction condo market in Toronto’s housing health is exacerbated by the fact that the resale market is slowing; in January, the GTA will have about 3,200 resale listings for a population of over 6 million people. Let us consider how chronically low that scarcity is. It has one of the world’s lowest inventories per capita, and this will likely worsen as immigration increases. Price levels in the resale market are setting records, and this is now spilling over into the pre-construction market as homebuyers have nowhere else to run.

The Toronto real estate market has already priced many immigrants and millennials out of the goal of owning a low-rise house. Historically, new developments and pre-construction projects have been popular options. Those who have given up on the resale house market still have hope, thanks to developers’ flexible payment plans and lengthier completion times. However, there is an urgent need to act now; inclusionary zoning and increased material costs will push developers to seek greater rates, and there will be no reversing this price escalation very soon.