In the first two months of 2008, the Toronto condominium market has seen nine new high rise condominium openings, compared with five during the same period last year, according to Urbanation.
“In fact”, said Urbanation’s editor and executive vice president Jane Renwick, “we are forecasting 19,000 sales in the new condo market and 17,000 sales in the resale condo market for 2008.”
According to Urbanation, 2007 was a record-breaking year for the Toronto CMA condo market in that:
Annual unit sales increased by 40 per cent (22,654 new unit sales in 2007 vs. 16,114 in 2006 and 16,224 in 2005)
104 new condo projects opened in 2007 vs. 84 open in 2005, the previous record
2007 Toronto condo prices rose 11.3 per cent in the new sale market and 15.1 per cent in the resale market, over 2006 prices:
The double-digit price increase in the new sale market was partly driven by growth in Toronto’s luxury and ‘super luxury’ condo segment (defined as projects that trade over $600 per square foot – psf) which represented 3,784 new units in 2007 and averaged $844 psf.
‘Non luxury’ units in the new sale market, by contrast, in the CMA averaged $360 psf, once the luxury units were factored out.
Price increases in the resale market were even more substantial rising 15.1 per cent, from $278 psf in 2006 to $320 psf in 2007.
Balancing the 2007 price increases, condo mortgages remained affordable, as interest rates persisted at historically low levels. Amortization periods also extended to 40 years, generating lower monthly payments, or allowing for the purchaser of a more expensive unit at the same monthly carrying cost of a mortgage based on a 25 year amortization. Furthermore, the definition of a conventional mortgage changed in 2007 from 25 to 20 per cent down, reducing mortgage insurance requirements at the same time. Unlike the US subprime market, however, Canadian lenders did not relax their credit evaluation standards, and the Canadian mortgage default rate remained at just 0.25 per cent (one in 400 mortgages).
“To answer the fundamental question, ‘Can the Toronto CMA continue to absorb high levels of new supply, especially in light of the considerable number of units that will be added to the resale universe in 2008’the answer is, Urbanation expects the general sales momentum of recent years to hold through 2008, although the sales performance of 2007 will be difficult to duplicate,” said Renwick.