Condos appreciated faster than detached homes in 2017, largely a consequence of the affordability and land scarcity crunches that have become particularly pronounced in the Vancouver and Toronto metropolitan regions.
The Royal LePage National House Price Composite, which looked at the fourth quarter of 2017, revealed condos appreciated 14.3% year-over-year, but that number jumped to 19.5% in the GTA, and just a hair higher to 19.6% in the City of Toronto.
“The condominiums are what I call the last bastion of affordability,” said Royal LePage’s CEO Phil Soper. “While they’re expensive in places like Vancouver and Toronto, they’re still much more affordable than detached homes.“
While land value is highest on detached lots, where demand is through the roof but supply is extremely low, condos aren’t bound by the same constraint because sky’s the limit, provided very tall buildings are funded and approved.
“With condos, because we can go up, we don’t have to have new land; we just need planning, capital and approvals from the municipal development boards,” said Soper. “Once we have that, we can go up and we’re not constrained by land affordability. Availability and affordability drove people towards condos in 2017.”
Claude Boiron, a University of Toronto lecturer on real estate investing, isn’t surprised. He says the Fair Housing Plan demobilized more expensive properties, namely single-family detached homes, often leaving people hamstrung by properties they’d just purchased and ones they couldn’t sell.
“The market for freehold properties in very hot neighbourhoods bottomed out very quickly, and then we had two to four months where people who bought a new home could not sell and were forced to hold a property,” he said.
“Anything under $700,000, which only leaves condos, more people were able to afford that than any other price class.”
Soper says ‘peak millennials,’ who are aged 25 to 30, are one of the largest demographical groups in Canadian history and roughly a third own their homes—mostly condos—but 30% will be purchasing over the next decade. Add another three to five years until they start families, and “you will see a huge opportunity to service these growing families,” said Soper.
“One of the most attractive investment sectors in Canada will be condominium properties focused on serving the needs of both young people, young single buying first home and young couples who are having their first child. Demographically, that segment is set to explode over the next decade.”
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Dubbed the ‘Year of the Condo,’ owning a piece of real estate in the sky proved the smartest bet last year, according to a new report released this morning.