Influx of new home projects to hit the Toronto market this summer
With the spring market now over, the summer season for buying and selling new construction homes is officially underway.
This time last year, Ontario was coming out the other side of its first COVID-19 lockdown, a period that was defined by extremely low home sales and closed presentation centres. Mark Cohen, Co-Founder and Managing Partner of TCS Marketing Systems (TCSMS), said that the many uncertainties of 2020 led developers to postpone new home project launches until this year, a decision that will see many projects come to market this summer.
“I expect that along with the rising prices of construction materials, we are going to see a lot of projects come to market and the demand even higher if potential purchasers managed an extra year of savings for their downpayments,” said Cohen.
“We are seeing record prices in the GTA and projects selling out fast, showing a very active transaction period as we get through the summer season,” he added.
According to the most recent market analysis from the Building Industry and Land Development Association (BILD) and Altus Group, the number of unsold new construction homes rose to 12,571 units across all phases of construction in April 2021. That month, new condo sales in the Toronto region also broke a 20-year sales record, logging 3,619 transactions.
With many of us confined to home during lockdown, it’s been a common anecdote in real estate that buyer preferences and behaviours have changed as a result.
Glen Buttigieg, Vice President of Sales at TCS Marketing Systems, explains that the pandemic has highlighted a shift in what buyers are looking for these days, with more purchasers gravitating towards access to local amenities, outdoor facilities and flexible unit space. There have also been high levels of buyer interest in new construction communities located outside of central Toronto.
“There have been several big project launches in 2021, and while the downtown core started picking later in the spring, markets like Markham, Scarbrough, Vaughan and Etobicoke have been hot all year and seem to be more in-demand to the current buyer pool,” said Buttigieg.
New single-family home sales dominated their condo counterparts during last summer’s market recovery. In June 2020, BILD reported 1,160 new single-family home sales, a number that far outpaced the 744 new condo units that sold in the same month.
Cohen said that while we saw an influx of single-family home sales outside of Toronto in 2020, there will always be greater demand to be close to the amenities and lifestyle options found in cities, where the primary purchase option is a condo.
“We are seeing record price-per-square-foot prices for condominiums now in 2021 and I expect while the pricing may level out, the demand for affordable home options means the condo will remain king,” said Cohen.
Although new home sales have been accelerating this year, the rising costs of building materials remains a challenge for the new home industry, especially in Toronto where costs could rise between seven to eight percent this year. According to insights from Altus Group, the increased costs of essential services like formworking have the potential to put new developments in an unpredictable position, making it more difficult for developers to forecast construction costs.
Cohen explains that the pre-construction industry relies heavily on pre-sales, with budgets often mapped out two years in advance of ground breaking.
“We are already seeing higher price-per-square-foot [numbers] across the board from new projects launching, but with the increase in lumber and steel prices, it is going to be a challenge for developers who sold early to meet their marks,” said Cohen.
New construction developers were forced to adapt to digital alternatives when COVID-19 shuttered sales centres and cancelled launch events in 2020. Although the industry has adapted well to these changes, Buttigieg says that TCSMS clients are now looking to return to brick-and-mortar sales centres.
“This is more the case for the suburban projects rather than in the downtown and midtown core, but I foresee a mix of the old and new as we move forward into the next phase of re-opening,” said Buttigieg.