Three areas poised for growth in the GTA's booming new home market

According to data released by BILD and its data partner the Altus Group, the sales of new homes in the GTA in April 2021 marked a 20-year high for the month. The pre-construction market is back, big time.

A question I get asked regularly is: Where is the next hot spot for real estate in the Greater Toronto Area? I’m trying not to think too short-term, but COVID-19 has certainly impacted my opinion, especially about prime downtown real estate.

If you are an investor looking at the highrise condo market in downtown Toronto, there is certainly a lot of inventory coming to market this year via completions. There is a multi-year lag between the sales and deliveries, and there was a record of more than 35,000 new condominium sales in 2017. Those buildings launched in 2017 are just now starting to complete and occupy, and they have a high share of investor purchasers who plan to rent them out.

According to data from rentals.ca, the average rent for condo apartments in the downtown core decreased by more than 20 per cent from the late 2019 peak to early 2021 though, an unprecedented drop. Some buildings have seen average rent decline by more than 30 per cent during that time. I fundamentally believe people will return to downtown, they will return to office towers, and the market will pick up again. Still, I would recommend being cautious when looking at condo product for more than $1,400 per-sq.-ft., especially if you’re looking to rent your suite for somewhere near your carrying costs.

The demand for new ground-oriented housing (single-detached, semi-detached and townhomes), in the outer-suburban markets has taken off again, with average pricing up 25 per cent annually in April. We’ve seen this story before. The average price for unsold new single-family homes increased by about 45 per cent annually in 2017, prompting the government to do something to stop it. Following the introduction of the Fair Housing Plan in April of 2017, demand and pricing declined significantly, and there was a couple of years of price flatness and tepid sales absorption. With lumber prices going through the roof right now, new single-family homes prices are only going to skyrocket. This segment of the market has experienced a lot of price volatility, so if you are an investor, you have been warned – volatility equals risk.

Oakville

So where does this all leave us? Opportunities are emerging in certain areas, in terms of new condo construction. The explosion in new high-density activity in Oakville may be a good indicator of things to come in other municipalities. Oakville is a highly desirable town and, because of the spike in downtown Toronto, pricing has become much more appealing to investors, with pricing from $850 per-sq.-ft. to $900 per-sq.-ft. Look for the same type of boom to occur in Aurora near the GO train station, and around Yonge and Bayview.

Hamilton

If you still can’t wrap your head around paying more than $500,000 for a 600-sq.-ft. suite, you should take a look at Hamilton. The downtown is going through a revitalization, and many of the condo projects launched there recently have sold out in less than a year. This is a stunning result for an area completely ignored five years ago. Downtown Hamilton is what downtown Toronto was 25 years ago; if you have a long-term vision, this is a great place to put your money.

Scarborough

But my top choice right now is Scarborough; it is about the only place in the amalgamated City of Toronto where you can buy a unit for less than $900 per sq. ft. If you are a local investor, you don’t have to drive an hour to get to your property, and there is tremendous investment in future transit coming to Scarborough. In 15 years, Kingston Road will be unrecognizable, with mid- and highrise towers from Victoria Park in the west to Pickering in the east. Look for an explosion of activity around the GO train stations as well.

If you’re in the market for a new home, surround yourself with an experienced team, including a realtor familiar with the new home market, and a mortgage broker who can find you the best deal. Buy what you can afford, buy for the long-term, and do your research. Good luck.