Suburbs in Toronto are experiencing a boom in condo project launches and pre-construction sales, as the pandemic’s work-from-home trend prompts buyers to look out of town.
Suburban condo projects accounted for 65% of all launches in the Toronto area in the third quarter of this year, according to the latest data from industrial research group Urbanation Inc.
This is not the first time that the development of condos in the suburbs has exceeded that of the city, but marks the largest margin ever recorded. Additionally, pre-construction condo sales more than doubled in the suburbs compared to the third quarter of last year, while sales fell 16% in the city of Toronto over the same period.
“Projects in downtown Toronto are not seeing the same level of enthusiasm from buyers as they were before COVID,” said Kash Pashootan, managing director of Emblem Developments, which recently launched a 17-storey, 336-unit condo project in Mississauga. “Right now the premium you pay to be downtown is not being realized,” he said.
Interest in the Toronto suburbs, also known as 905 due to its area code, has been on the rise for years as buyers can get bigger homes at much cheaper prices. But since the start of the pandemic, the desire for homes with more space for an office and a backyard has supercharged the competition in the 905.
And with office workers forced to work from home and companies considering working remotely all the time, it has become easier for workers to live outside of the city of Toronto.
Resale prices for homes in all types of properties have increased at a faster rate in the areas surrounding the city. For city condos, the home price index rose 5 percent in October, compared to the same month last year, according to the Toronto Regional Real Estate Board. In contrast, in western Halton region, the condo price index rose 11%. To the east, in Durham Region, the index climbed 12%.
This has influenced developers, investors and buyers of pre-construction condos. Although homes get more expensive in the 905, prices are still lower in general. For example, the price of a pre-construction condo sold on average $ 915 per square foot in 905 versus $ 1,275 in Toronto, according to Urbanation.
“Part of the trend may be related to the more general shift in demand in the suburban property resale market 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 steadily climbed as a multitude of companies, from PricewaterhouseCoopers to Ritual Technologies, have 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 fell 8.5% and the average selling price rose only 0.8% from the same month last year, according to the local real estate board. In contrast, condominium resales in the 905 increased by 28% and the average selling price by 7% over the same period.
“People wanted to be close to their workplace. But the nature of the job is changing a bit, “said Matt Elkind, senior broker at Connect Realty, who works with investors and has observed greater interest in 905.” Even though COVID is a temporary thing, people are rethinking s ‘they have to go to the office,’ he said.
The rental vacancy rate is increasing and rental prices are falling in the city. Additionally, many Airbnb unit owners have put their properties on the market for long-term rental or for sale after tourism disappeared. This increased supply in the downtown area, as the market was flooded with a flood of new condos. The glut of condos has made some developers think.
“Any sort of inventory is a deterrent to launching a project,” said Pashootan, who, like other real estate players, believes interest in the kernel will quickly recover when the pandemic will weaken and the economy will reopen.
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