The dual effect of plummeting house prices and soaring condominium prices in the City of Toronto has reduced the price gap between the two types of property to its lowest since the housing market peaked in April 2017, according to data extracted by VICE from the Toronto Real Estate Board.
The difference in average prices between a single-detached house and an “apartment” — the term TREB uses to define studio, one or two bedroom condominiums or apartments — hovered at $582,600 in July 2018, compared to $762,100 in April 2017, when Toronto’s real estate market was at a historic peak. In fact, over the last 18 months, the price gap between condominiums and all kinds of houses — single-detached, semi-detached and townhouses — has incrementally fallen, driven more by rising condominium prices, than cooling house prices.
That essentially means that at present time, discounting any other factors that might swing Toronto’s property market in one direction or the other, it is perhaps more economical — if one can afford it — to purchase a house over a condominium.
In April 2017, it cost an average of $1.28 million to purchase a single-detached home in the City of Toronto — at that point, a condominium cost an average of $464,200. By contrast, in July 2018, the average price of a single-detached home was $1.12 million, but the average price of a condo, had jumped to $530,200. For the sake of comparison, that’s the same price as a semi-detached house in the City of Toronto just six and a half years ago, and just slightly lower than what it would cost to buy a single-family attached house in numerous suburban neighbourhoods within a one-hour commute distance of Toronto like Newmarket, Brampton, Halton Hills and Pickering.
“We have definitely never seen condominium prices this high. In fact, we’re trending towards the gap being as low as it’s ever been in Toronto,” said Tom Storey, a real estate agent at Royal LePage Signature Realty. “It’s an amazing time for move-up buyers. In the downtown core, you’re seeing the difference between a townhouse and a condo at $400,000, compared to $550,000 which was how it was a year ago.”
Still, at least in the City of Toronto, which does not include suburban property markets that make up the Greater Toronto Area, nothing is quite in the range of “affordable”. The average price of a one-bedroom condominium in Toronto’s downtown core is at least $580,000, with many units selling for well over $600,000, according to Storey.
The average price of a single-detached home that was almost $1.3 million at the peak of the market, as since dropped to $1.12 million, but it is still out of reach for most. If you’re on the hunt for a townhouse, but would still like to live in the city itself, you’re looking at forking out at least $634,400, according to TREB data.
Condominium prices in Toronto have been rising steadily over the past five to seven years, but they began an extraordinary surge in late 2016 and early 2017, when Toronto’s real estate market as a whole was peaking. Several policies introduced in the latter part of 2017 to combat bubble-like price movements — a 15 percent tax on foreign buyers, tighter mortgage requirements, and higher interest rates — successfully cooled house prices, but the condo market remained immune from government intervention.
In the 16 months since the imposition of Ontario’s “Fair Housing Plan”, a set of initiatives designed to restore affordability to Toronto’s property market, house prices have fallen roughly 10 percent in the City of Toronto, but condo prices have climbed 14 percent. The drop in house prices was even more extreme in the suburbs of Toronto — up to 20 percent, in some cases.
The deviating price trend between houses and condos is largely due to the relative affordability of the latter over the former, believes Jason Mercer, TREB’s Director of Market analysis. “In an environment where borrowing costs have risen and the criteria for obtaining a mortgage has gotten stricter, people aren’t going to be able to afford as much,” Mercer told VICE. “And the key driver of condominium-apartment demand are first-time buyers, who generally don’t have a big enough downpayment to afford a house.”
Indeed, the macroeconomic factors align — Toronto’s economy is on a tear, with unemployment at a 17-year low, and migration into the city, particularly from other provinces in Canada, rapidly rising.
“We’ve had four rate hikes since last year — money is now more expensive to borrow, and on January 1st we had those stress tests come into place that means you’re getting approved for less money. Some of my clients, their purchasing power has gone down by 17 to 20 percent,” said Storey, who is convinced that demand for condominiums will continue to remain high despite a surge in new listings that are expected to come onto the market in 2019 and 2020, as a slew of condominiums reach the end of construction.
And he claims that the aggressive bidding wars of early 2017 are making a comeback in Toronto — this time for one bedroom condos, not houses. “In certain neighbourhoods of Toronto I’ve seen bidding wars that have pushed up 1 bed, 1 bath condos to $680,000 sometimes $700,000.”
“Look, as crazy as it sounds, 1 bedroom condominiums for $500,000 are still the most affordable housing option for anyone looking to get their foot into the property door in Toronto.”