The year 2018 will be remembered as a year when the pre-construction condo market returned to more of a normal market in sales volume, with a steep rise in prices.
The current year 2019 will likely continue with more of a normal volume of sales, with less available inventory, and steadily rising prices.
The market was cooled from its red hot sales volume by a number of upward pressures on the price to build new condos.
The carbon tax drove up the cost of materials, the U.S. tariffs drove up the cost of steel further, the cost of labour went through the roof, development charges increased dramatically, and the cost of developable land skyrocketed.
Many developers are having major problems scheduling trades, due to the high number of GTA high rise housing starts.
Developers are being cautious releasing new projects and this will continue into 2019.
A reduction in available inventory caused by less new GTA high-rise projects being released in 2019 will allow the public to become accustomed to the new world of pricing, caused by the spike in building and development costs.
Despite healthy sales volumes, there is an overwhelming pent- up demand to buy that is being held back by negative influences on consumer confidence.
Consumer confidence is being hurt by the banking Industries 8 aggressive increases to regulations over the last two years, like the latest 2 percent stress test, that make qualifying for a mortgage very difficult for many real estate buyers.
New home and condo buyers will have to drive to affordability, choose properties in locations like Milton, Grimsby, and Caledon, or buy less expensive properties than are ideal.
There are a number of other negative drivers of consumer confidence like the uncertainty from Brexit, the October 2019 Canadian election, and the provincial-federal government carbon tax battle, just to name a few.
The IMF projects confidence in both global GDP and U.S. GDP in 2019.
When the United States does well economically, Canada tends to follow with good economic growth.
The Ontario government is changing direction economically, attempting to reduce taxes, regulation on businesses, and energy costs.
As Real Estate prices continue to rise with economic prosperity, it will become more and more unaffordable for new and existing Real Estate consumers to buy what they want.
Downtown new condo prices have attained the million dollar milestone for 500 sq. ft. in 2018, with the example of suites at King Toronto reaching $2,000 per sq. ft.
The reality is that the rate new buyers can save cannot keep up with price increases.
If a million dollar new condo appreciates 10 percent in a year, the average buyer cannot save $100,000 in one year.
The message is that we should expect a healthy volume of new condo sales and a steady increase in price in 2019.
Now is the time to buy because in the future, buying may no longer be an option.
Scott Davie, founder of Davie Real Estate Inc., has over 30 years of experience in Real Estate and has been a trusted advisor to many of the GTA’s top Developers; has sold low and high rise pre-construction projects from Brantford to Whitby, and from the Beaches of Toronto to Newmarket; and is recognized as a leading expert on pre- construction real estate sales and marketing in the GTA.