Toronto suburbs are experiencing a boom in condo project launches and preconstruction sales, as the pandemic’s work-from-home trend entices homebuyers to look outside the city.
Suburban condo projects accounted for 65 per cent of all launches in the Toronto region in the third quarter of this year, according to the latest data from industry research group Urbanation Inc.
This is not the first time suburban condo development has surpassed the city’s but marks the widest margin on record. As well, sales of preconstruction condos more than doubled in the suburbs compared with the third quarter of last year, while sales dropped 16 per cent in the city of Toronto over the same time period.
“Downtown Toronto projects are not seeing the same level of enthusiasm from buyers as they were pre-COVID,” said Kash Pashootan, chief executive of Emblem Developments, which recently launched a 17-storey, 336-unit condo project in Mississauga. “For the time being, the premium that you pay for being downtown is not being realized,” he said.
Interest in the Toronto suburbs, also known as the 905 because of its area code, has been growing for years as homebuyers could get larger homes at much cheaper prices. But since the pandemic started, the desire for homes with more space for an office and backyard supercharged competition in the 905.
And with office employees forced to work from home and businesses considering permanent remote work, it has become easier for workers to live outside the city of Toronto.
Home resale prices across all types of properties have risen at a faster pace in the regions surrounding the city. For condos in the city, the home price index was up 5 per cent in October, compared with the same month last year, according to the Toronto Regional Real Estate Board. In contrast, to the west in the Halton area, the price index for condos was up 11 per cent. To the east in Durham region, the index climbed 12 per cent.
That has influenced developers and preconstruction condo investors and homebuyers. Although homes are becoming more expensive in the 905, prices are still lower in general. For example, the price of a preconstruction condo sold on average for $915 per square foot in the 905 versus $1,275 in Toronto, according to Urbanation.
“Part of the trend can be connected to the more general shift in demand across the resale market for suburban properties as a result of COVID-19,” said Urbanation president Shaun Hildebrand.
Meanwhile, the downtown office district is currently a ghost town. The office vacancy rate has been steadily climbing, as a sea of businesses from PricewaterhouseCoopers to Ritual Technologies, put some of their space on the sublet market.
Condo resales and rental rates have taken a hit in the city of Toronto. In October, condo resales dropped 8.5 per cent and the average selling price was up just 0.8 per cent compared with the same month last year, according to the local real estate board. In contrast, condo resales in the 905 were up 28 per cent and the average selling price increased by 7 per cent over the same time period.
“People wanted to be close to where they work. But the nature of work is changing a little,” said Matt Elkind, senior broker with Connect Realty, who works with investors and has observed more interest in the 905. ”Even though COVID is a temporary thing, people are rethinking if they have to go to the office,” he said.
Rental vacancies are up and rental prices are down in the city. As well, many owners of Airbnb units have put their properties on the long-term rental market or up for sale after tourism disappeared. That has increased supply in the downtown core, just as the market was being flooded with a stream of new condo units. The glut of condos has given some developers pause.
“Any sort of inventory is a deterrent to launching a project,” said Mr. Pashootan, who like other real estate players believes that interest in the core will quickly recover when the pandemic subsides and the economy reopens.
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