New condo sales have ramped up in Ontario’s less populated regions, including Niagara and Simcoe, a sign that demand for housing in suburban and semi-rural areas is growing stronger.
Since the COVID-19 pandemic began, home buyers have sought larger properties for their home offices and entertainment. The competition for more space has created a frenzy in the housing market, with home prices in semi-rural regions increasing as much as 30 per cent over the course of the health crisis.
But the latest data show that there were also strong sales of preconstruction condos. These are condos that have either yet to break ground or are under construction, and sales for these projects are often viewed as a bet on the future because buyers wait several years for their units to be built.
In the Wellington and Niagara regions in Southern Ontario, preconstruction condo sales more than doubled from 2019 to 2020, according to Altus Group, a commercial real estate data firm. In the Simcoe and Waterloo areas, new condo sales rose 39 per cent and 22 per cent, respectively, according to Altus.
“Strong resales provide confidence that the market is strong,” said Matthew Boukall, a vice-president at Altus.
At the same time, preconstruction condo sales fell in most of the country’s major urban centres in 2020. In Canada’s largest real estate market, the Toronto region, new condo sales were down 22 per cent year over year, with weakness in the city offsetting higher sales in the surrounding suburbs.
In Edmonton, new condo sales decreased by 54 per cent, and in Calgary by 11 per cent. In Hamilton, a commuter city, sales fell 73 per cent. In Montreal, they dropped 29 per cent when comparing the first three quarters of 2020 with the same period in 2019, according to Altus. Vancouver was the only major city to see an increase, up 8 per cent year over year.
As home prices have been steadily increasing in smaller cities, real estate companies have pushed new condo developments in those areas.
Crown Communities bought land in Barrie, Ont., north of Toronto, in 2017, as demand for housing there grew and prices exploded. Home prices in the Barrie area are up nearly 30 per cent in the 12 months to January, according to the Canadian Real Estate Association. That price increase is more than two times greater than Toronto’s.
“Barrie has been a sought-after market for quite some time,” said May Taverna, Crown’s chief operating officer. The real estate company has a total of four condo building projects in Ontario, two of which are in the Toronto region and are under construction. In the east end of Toronto, a Scarborough project is set to launch this fall and the one in Barrie is expected to launch next year.
About half of Crown’s condo buyers have been investors, according to Ms. Taverna. Like other home buyers during the pandemic, investors have been looking for bigger properties with green space.
“Investors previously considered a location in terms of proximity to the downtown core,” she said. “Investors are now equally assessing accessibility to outdoor space and nature, proper spatial planning within the suites to accommodate working from home.” Crown is considering changes to the design of outdoor space to accommodate pandemic measures such as physical distancing.
Although suburban condo sales were stronger than in urban centres last year, new condo projects in the City of Toronto are becoming popular again as rental rates and condo resales start to pick up. The average monthly condo rent in the Toronto region rose to $2,033 in February from $2,011 in January, according to industry researcher Urbanation Inc. Although that rent is lower than before the pandemic, it marks the first month-to-month increase since April.
As well, condo resales in the city have been climbing and the average selling price of a condo increased 8 per cent January to February after steadily declining in the last few months of 2020.
“Investor interest has rebounded,” said Urbanation president Shaun Hildebrand, adding that developers have launched projects this year at prices that are on par with prepandemic levels. “Investors are expecting strong appreciation as the condo market starts to catch up to the detached market” and they don’t have any attractive alternatives for their money, he said.
The expectation of higher prices is a cause of concern for the Bank of Canada. Governor Tiff Macklem has said there are “some early signs of excess exuberance” in the housing market. “When we see people starting to buy houses solely because they think the prices are going to go up, that is a warning sign for us,” he said in February.
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