Condominium prices in Canada’s biggest city soared by 22 percent in 2017, landing at a spectacular $523,437, despite heavy regulations put in place by the government earlier this year to tame Toronto’s roaring real estate market, according to data from realty firm RE/MAX.
That narrative, however, stood in stark contrast to the measured price movement seen in the single-family detached home market, which saw a modest gain of eight percent in the Greater Toronto Area — most of that took place between January and March 2017, before the Ontario government introduced a 15 percent tax on foreign buyers of Toronto property.
The story was not dissimilar in Vancouver — the condo market saw a 16 percent gain in 2017, while single-detached house prices were roughly stable between 2016 and 2017.
“The single-family detached home segment of the market in both the GTA and Greater Vancouver has felt the most significant impact following recent provincial government policy changes,” said Christopher Alexander, Executive Vice President at RE/MAX.
That does not however, indicate that prices of actual houses are anywhere close to affordable in both Toronto and Vancouver. As it stands, the average house price in Toronto hovers at the $780,000 mark — it is significantly higher in Vancouver, averaging at roughly $1.16 million.
There are a couple of reasons for the divergence in price trends between condominiums and single-detached homes. The first and most likely factor is simply, that a condo unit costs less than owning a house — for young families and first-time home buyers who are middle-income earners, house prices are simply out of reach.
Secondly, there’s a constant trend of strong foreign buyer demand for centrally-located condominiums Toronto and Vancouver, even after the foreign buyers tax was imposed in both cities. According to data from the Canada Housing and Mortgage Corporation, one out of every 10 condos built in downtown Toronto since 2010 is owned by someone living outside Canada. In Vancouver, 6.6 percent of condominiums built since 2010 are owned by foreign nationals.
Some industry experts are also pointing towards Ontario’s rent control policy as the reason why condo prices have gone up. Jim Ritchie, Senior Vice-President of sales and marketing at Tridel, a luxury condo developer in Toronto, believes that new condos will actually become more attractive that resales, because rent control rules do not limit how much you can charge a tenant initially — only subsequent increases are subject to a 10 percent cap.
It’s worth noting that Canadians, to a great extent would much rather own than rent. 68 percent of Canadians already own a home, according to RE/MAX, and 48 percent want to purchase a home in the next five years.
But at the same time, a vast majority — 73 percent to be exact — would prefer to live in a detached home, as opposed to just 24 percent that would prefer a condo. The issue is, at present prices, they still can’t afford the former.
RE/MAX predicts that home prices overall in Canada will rise by just 2.5 percent in 2018. That’s less than what rival firm Royal Le Page forecasts in their end-of-year report — a rise of five percent, propelled by buyer demand in the Greater Toronto Area.