Toronto condo sales help elevate Toronto real estate market
A stronger than expected Toronto area housing market, buoyed by robust condominium sales, means the average price of a home will appreciate faster this year than originally forecast, the Canada Mortgage and Housing Corp. says.The CMHC said yesterday the average price of a resale home should rise by 5.9% this year to $356,000. The original forecast at the beginning of the year was for real estate prices to rise 4% by the end of 2006.
“We’re seeing a little stronger demand than we anticipated and we’re adjusting for that,” said Jason Mercer, a CMHC senior market analyst.
Higher prices in the Toronto housing market mean buyers will continue to turn to less-expensive housing types such as semi-detached homes, townhomes and especially condominiums, Mercer said.
In 2005, a record 17,693 new condos in Toronto were purchased from developers.
Meanwhile, a report released yesterday by ReMax Ontario-Atlantic Canada says resale condominium sales in the first quarter of the year are at the highest level in five years.
Close to 5,900 units changed hands in the first three months of the year in the Toronto area, up 14% compared with the first quarter of 2005.
A shortage of good condos-for-sale/propertysearch.htm” title=”toronto condos for sale” target=”_blank”>condominiums has placed significant upward pressure on prices for the first time in several years. High prices for detached-homes are at the root of increased demand for condos, the CMHC said.
Condo prices remained relatively flat per square foot in the Toronto area in 2004 and most of 2005 because of competition from so many new developments.
While the market for Toronto condominiums is currently tighter than expected, analysts have warned it won’t last forever. An expected 12,000 to 14,000 average completions annually over the next several years will dramatically bump up supply and likely moderate prices. The CMHC expects 17,500 condo starts for this year alone.
“While there is quite a bit of demand for existing condominiums, the concern has always been that some of these new units when completed will come onto the resale market and compete with existing listings,” Mercer said.
Overall, demand for existing homes will remain at a lofty 84,000 sales in 2006, down only 2% from last year, according to the CMHC forecast. New home construction is expected to dip to 39,900 units this year, still above the 10-year average of 36,000 starts.
Mercer expects prices to moderate as interest rates increase, making houses less affordable. The revised 5.9% increase means that price growth continues to decline from 6.6% at the end of 2005.
Housing prices should do slightly better than inflation over the next few years, with a forecast 4% further appreciation in 2007, Mercer said.
Investors are still active in the Toronto condo market, accounting for one-third of sales in the downtown core, CMHC said.
The most active price range in the Toronto area is $250,000 to $350,000, which buys a one bedroom plus den condo in the Toronto area. With Bay Street reporting record results, the upper end of the market has also been doing well, with 170 condos and townhomes more than $500,000 changing hands in the first quarter, up 68% from last year.
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