GTA’s Vibrant Condo Market to Continue to Thrive in 2018
Despite factors such as new mortgage rules, the non-resident buyers’ tax and lengthier wait times for developers to get projects to market, expect 2018’s condo market to be “alive and exciting.”
That’s the prediction from the team at Baker Real Estate, a Toronto-based company that specializes in marketing and sales of pre construction residential and commercial condominiums, new homes, and master planned communities.
Company president and CEO Barbara Lawlor, senior vice presidents Jeff Clark, Debbie LaFave and Harley Nakelsky sat down with the Epoch Times to share their views on the 2018 market. They see a strong market continuing, especially in the condo sector.
Even government measures to cool the red-hot market of 2017 did little to slow condo sales, they say. The Fair Housing Plan, announced in spring of 2017, imposed an annual 2.5 percent cap on rents as of January 1, 2018. Lawlor says that instead of having a dampening effect on investors, it has not cooled interest. Instead, investors are buying pre-construction condos—they won’t be delivered for three to five years and when they take possession, they can set the rents as high as they can. With less than a one percent vacancy rate in Toronto, they still see condos as a good investment, she points out.
“The rental cap in fact spurred on condo sales,” adds Nakelsky. “It raised rental rates and anyone with an existing rental could get their unit reappraised (to be able to charge higher rent).”
The Fair Housing Plan also brought in a 15 percent tax for non-resident buyers, but Baker describes the effect as “tepid” on condo sales as foreign buyers comprise such a small share of the market.
“We have always tracked foreign deals and they are only about three percent of (GTA) sales,” she says. “China is number one, the United States is second, followed by the United Arab Emirates, India, and Pakistan.”
New mortgage stress test rules imposed by the Office of the Superintendent of Financial Institutions now require even those who have 20 percent down to demonstrate they can afford a mortgage at the five-year average rate posted by the Bank of Canada. Lawlor says the nature of the investor has changed and many are professionals such as doctors or dentists, and they should be able to meet the new criteria.
The stress test may affect some first-time buyers, but Lawlor says there is no need to be nervous. Only the major banks currently are obligated to impose the new stress test and she expects we’ll see third party lenders, such as are in the U.S., come into the market to offer more borrowing options.
There is also talk of extending mortgage amortization periods which would help people qualify as well, she says.
What may be the low-rise market’s loss as affordability decreases will be high-rise’s gain, Lawlor predicts. “The group that can afford to spend $500,000 to $700,000 can’t buy a house anymore so will buy a condo. The $800,000 to $1 million group is switching over too. High-rise is coming on strong.”
Not just affordability is fuelling the high-rise market. She says there has been a psychological shift and condo living is perceived as convenient and desirable, especially in Triple A locations.
Condos are a hot commodity all over the GTA, Lawlor says, from Vaughan to Mississauga to North York. “Condos are being sold for unheard-of prices in unheard-of locations,” she says. “There has been an astonishing shift because of new transit lines.”
East downtown is quickly rising as a sought-after neighbourhood, points out Nakelsky. The area east of Yonge Street is enjoying revitalization, has more transit options, retail stores and financial institutions are moving in, as well as companies such as Google.
“Scarborough has been Toronto’s poor cousin for a long time, but look for it to take a giant step forward in 2018,” predicts Lawlor.
Trends the Baker team identified include more new builders coming into high-rise as they are having trouble getting land or approvals for low-rise projects; more foreign developers coming in, including from China, who see Toronto as a good investment; and smaller suite sizes as developers look for ways to keep condos affordable. Access to transit—whether bus, streetcar, subway or by foot—will continue to top buyers’ wish lists. Immigration will continue to be a big driver and many of those new Canadians want to be near transit and educational institutions.
“Parents are buying condos for their children, near York and Ryerson universities, and even near colleges such as Seneca,” says Clark. “There’s a strong Chinese buyer component here.”
Montreal is emerging as a new hotbed for investors too, says Lafave with strong Chinese interest there. The historic city is rebounding economically and the housing market is undersupplied.
In the GTA, while red tape at city hall and lengthy waits to get projects approved “is definitely a cog in the wheel” for getting developments to market, says Clark, there are some exciting new project launches coming in early 2018.
Watch for Highlight Condos, Lofts and Towns by the Hazelton Developments at Dixie and Burnhamthorpe Rds. in Mississauga, the Cardiff mid-rise, mixed-use project by Sierra Developments in the Bayview-Eglinton area and the final tower of the master-planned Emerald City at Sheppard Ave. and Don Mills Rd. in North York.
Tracy Hanes is a GTA-based freelance real estate writer.