It seems everyone has something to say about the Toronto condo market - the increase in tall towers with micro condos, will value appreciation continue to rise above inflation and, of course, continued predictions about the impending condo bust, despite the fact that demand has proven to keep pace with supply through the peak years of new condo builds. But we don't hear as much talk about the Toronto loft market specifically, which is really a niche market within the larger condominium market.
Unlike the condo market where we're seeing a fairly good balance of supply and demand overall across Toronto (save for the ever-elusive family-sized condo and a shortage of listings in particular neighbourhoods), there is a significant shortfall of Toronto lofts and a heck of a lot of pent-up demand as we kick off the 2016 real estate year.
The demand for authentic, hard lofts for sale in Toronto is increasing at a much faster pace than supply can feed and devleopers aren't converting a lot of historic buildings anymore. And so we're seeing an increase in things like hold for offer dates and multiple bids on Toronto lofts, with unique properties typically selling above list.
Let's take a look at January's real estate stats as a whole and then zero in at what's happening in the Toronto loft market specifically.
2015 was a record-breaking year for GTA real estate and so it's no surprise that 2016 has started off with a bang. January's results were as follows:
You can see from the above stats that detached homes continue to exhibit the strongest year-over-year value appreciation and semi-detached properties are also continuing to rise at a higher than usual pace.
As well, the 905 market is continuing it's hot streak. In fact, the 905 surpassed Toronto last month in its rate of price growth across all property categories with the exception of condos (which includes condominium lofts). And that makes sense. As the cost of Toronto houses for sale continues to rise at a rate that outpaces most buyers ability to earn / save, more and more buyers are pushed out of the core and into the suburbs.
Likewise, for buyers who want to stay in Toronto proper, more and more buyers are staying in condos and lofts longer and long gone are the days when first time buyers can jump straight to a freehold house. Given the fact that first time buyers made up more than half of the GTA market last year - even higher in Toronto itself - it's no surprise that we're seeing a huge increase in demand for condos and lofts.
According to Jason Mercer, Director of Market Analysis at the Toronto Real Estate Board, “First-time buyers account for approximately half of all buyers in the GTA and even more so in the City of Toronto. Condominium apartments represent an important entry point into home ownership for a lot of households. This is a key reason why we experienced continued growth in sales for this home type over the past year.”
And the numbers we're seeing supports this. The year-over-year price growth for Toronto condos in January was a staggering +8.6%. Keep in mind that the annual average in 2015 was +5% which itself led to record-breaking results. And while sales of Toronto condos were up +11.6% last month, decent loft listings were few and far between. We suffered from a serious listings shortfall in January and you can see what that constrained supply does to prices.
That's another thing that's long gone in today's real estate market - the old addage that it's best to buy in the winter and sell in the spring. Condo and loft prices continue to rise every month and so you're not saving by trying to time the market as a buyer. Likewise, as a seller, you can get top dollar in what used to be considered a "bad" month to sell like December or January because of this pent-up demand in the market and very little competition for you as a seller.
More first time buyers entered the market last year than ever before. First time buyers as a percentage of the buyer market mix isn't expected to drop this year - if anything, it could grow further.
As such, we're seeing an increase in demand for condos and lofts under the $500k mark. This is for two reasons. Firstly, most first time buyers can't afford a property above that - in fact, many are looking below $400k which is below the average cost of a condo in Toronto. Secondly, the new down payment legislation coming into effect next week means that if you have less than a 20% down payment - many first time buyers have just 5% or 10% down - you're going to have to purchase under $500k.
This has had an interesting impact on the loft market. On the one hand, authentic, hard lofts often offer a better cost per square foot value than newer condos. It's counterintuitive really - you'd think all of that charm and character would come at a premium but often, you can get what's arguably much better value in a Toronto loft for sale than a more stereotypical condo in the same price range.
On the other hand, because the average size of a loft in Toronto tends to be larger than the average new condo, the total list price is often higher, reflecting this extra square footage. So it can be difficult for first time buyers to score a great loft space on below-average budgets, particularly with a listings shortage. But it's not impossible by any stretch. We've worked with countless first time buyers to find a unique loft space for less. They do exist.
Please feel free to reach out to one of Toronto Loft Experts to learn more about how we're different and what services we can provide. Whether you're buying or selling this year, remember, these are not your typical market conditions. It's more important than ever to work with a specialist agent and not a generalist Realtor.