What’s The Price Of New Condos In This Changing Market?

Condos

6 minute read

January 25, 2023

Let me see, let me see….

….where do I stand on this topic?

On the one hand, I’ve always felt that developers charge way too much money in pre-construction compared to resale condos, and I have been arguing for fifteen years that the way we sell pre-construction condos in the province of Ontario is bordering on criminal.

On the other hand, I’m acutely aware of the insane cost to build condos in 2023, not to mention the absurd amount of taxes from all three levels of government that factor into the pricing…

Two weeks ago, I had a prospective buyer from California in the front seat of my car as we drove through various neighbourhoods in the city’s west end.  He’s looking for a house for his family, but at one point he said, “I just have to ask about condos.”

His budget is just over $2,000,000 and he’s probably going to end up with a detached, 4-bed, 4-bath house.

“What would it cost me for something in the 2,000 square foot range in a newer development, downtown?” he asked.

I explained that, first of all, there are very few 3-bedroom condos being built these days, let alone 4-bedroom condos.  Most condos are bachelors or 1-bedrooms since that’s what investors buy, and developers build what they can sell, not what the market needs or wants.

We were on the Gardiner Expressway and he pointed to the cluster of buildings at the foot of Spadina.

“That, there,” he said.  “What would it cost me to live in a 2,000 square foot condo in there?” he asked.

I pulled up listings at 23 Spadina Avenue, which is still under construction, and showed him my phone.

“There’s a 3-bed, den, 3-bath unit for sale,” I explained.  “It’s only 1,500 square feet though.”

He seemed intrigued.

“How much?” he asked.

“$3,149,000.”

He didn’t understand.

He couldn’t comprehend.

I could see the wheel in his head turning, but he fumbled for words.

I finally interjected, “I know, it makes no sense.”

And I said to him, “You’re buying a home for your family; your wife, two kids, dog, and you’re looking for a backyard to play in, a neighbour to wave to, and a community to be a part of.  Condo living is a different life.”

“Very different,” he said.

But I explained that a 1,500 square foot condo on the 62nd floor of a brand-new downtown condo doesn’t represent all of downtown condo living.  He could look at an older, “value building” like 25 George Street or 159 Frederick Street and pay $800-$900/sqft.

Who is paying $2,000/sqft for new construction in CityPlace?

I don’t know.

But after the blog I wrote last Friday about the new tower in Liberty Village where the investors are listing for $1,500/sqft and the builder is listing for $1,100/sqft, it got me wondering: what other condos are builders selling right now, and how much are the units?

No matter what happens in our economy and in our real estate market, there will always be a price floor.

A developer recently told me that his construction cost is $950/sqft.  So for all those people who say, “A downtown condo that’s 1,000 square feet ‘shouldn’t cost a million dollars,” maybe it won’t on the resale side, but I can assure you that no new condos will ever be built if that price can’t be achieved – and then some.

The cost of construction – which takes into account material costs, supply chain issues, and labour shortages, is only one part of the problem.  Being taxed to death (and beyond…) plus the price to acquire the land in the first place means that pre-construction prices will remain higher than you might expect.

So I sat down last week and looked at every condo in the downtown core for sale right now – about 2,000 units, downloaded all the data, and then sorted by “Seller Name.”  Any building where the developer is selling units became of interest, and here’s what I found.

First, consider that there are two types of “builder units” on the market:

1) Units in a registered condo
2) Units being sold in a building still under construction or occupancy

As we saw in last Friday’s blog with the condo in Liberty Village, the builder had four units on the market which were competing against four resale units, and the builder was actually undercutting the resale sellers on pricing.

Having said that, I’m absolutely amazed at some of the prices being asked by builders in other condos at the moment.

Case in point: “The Clover on Yonge Street” at 3 Gloucester Street.

Here’s a unit currently listed for sale:

I’ll save you the math.

This unit is listed for $2,007 per square foot.

No parking, no locker.

Sure, it’s on the 40th floor and I’m sure you’ve got a view……..of something.

But $2,007 per square foot is a price we’re not accustomed to seeing in our market, so unless the builder knows something we don’t, I’d say this price is optimistic.

The builder currently has fourteen units for sale with price-per-square foot as follows:

$1,972
$1,966
$1,972
$1,983
$1,989
$1,988
$2,007
$1,870
$1,886
$1,899
$1,910
$1,837
$1,751
$1,884

That’s in order from smallest unit (324 sqft) to largest unit (814 sqft).

The average PPSQFT is $1,922.

Now, this building is registered as you can see above, as TSCP 2941.  This means you’re buying from the builder, but you’re avoiding the occupancy phase.

But do you think the prices are higher because the building is registered?  Or is it simply because builders plan all along to keep a handful of units until after registration to sell for the highest price?

Maybe that would have worked in a previous market cycle, but I don’t believe units are going to sell for $2,000 per square foot unless we’re talking Yorkville.

Here’s a new project by Great Gulf Homes in King West which is also registered:

This is “only” $1,491 per square foot, which seems like a steal compared to the $2,000/sqft that units are being listed for at Clover on Yonge.

But then once the shock value of Clover wears off, you realize this is still $1,219,900 for an 818 square foot unit with no parking and no locker.

And it’s on the 11th floor.

The same floor plan is available on the 39th floor for $1,515 per square foot, which seems reasonable on a relative basis, but still kind of expensive compared to resale in the area.

Four units are listed by the builder at 357 King Street West with PPSQFT of:

$1,334
$1,491
$1,515
$1,321

A more reasonable evaluation exists at “Panda Condominiums” by Lifetime Developments.

Here’s one such unit:

This unit is 565 square feet, asking $799,990, which is $1,416 per square foot.

This building is also registered, and for the investor-driven buyer who simply looks at a map of downtown Toronto and sees “Yonge & Dundas” and then the location of this building, I can see this valuation be much easier to achieve than that of Clover on Yonge.

Now, in terms of buildings that are not yet registered, should we expect prices to be lower, higher, or the same?

Let’s start here with “Central Condos” by Concord Developments:

For those playing along at home, that’s $2,043 per square foot.

Why this location commands such a premium, I don’t know.  Festival Tower and Cinema Tower were huge in their own right, back in the day, and now we’re seeing $2,000+ per square foot for Central Condos.

Am I the only one that sees $970,300 in the same space as 475 sqft and does an immediate double-take?

Two more units listed by this builder:

600 square feet – $1,116,000 – $1,860/sqft
608 square feet – $1,150,200 – $1,892/sqft

I can’t make sense of that.

And this is no parking, no locker, just a cookie-cutter 1-bedroom condo for $1.1M.

The prices do come down a little bit once you get into the larger units.  “Only” $1,859/sqft and $1,597/sqft for the 2-bedroom and 3-bedroom units currently being offered.

Something a little more reasonable can be found futher east at another project by Great Gulf Homes, this one called “The Residences on Lombard”

Perhaps we’ve become desensitized to prices now, but this is only $1,320 per square foot.

This devlelopment is a conversion from an existing building, with only 17 units, and I find it interesting that seven units are listed right now.

Unlike most condos where a developer needs to pre-sell 80% of the units in order to start construction, this building seemed to be built and then sold.

Time will tell whether this strategy was worth it, since the market has dropped, although the price per square foot here is a lot lower than the others.

Speaking of which, here’s “Concord Canada House” by, well, Concord Developments:

This is the unit I mentioned in the intro today, which I mentioned to my California client during our tour.

For 1,500 square feet, you’re looking at a cool $2,100 per square foot.

This is when I start to think that, despite being in real estate for almost two decades, I know nothing about real estate.

For $3,149,900, I think there are literally 10,000 properties I would rather own than this one.  Just imagine what you can get for that price!  Now imagine spending it on a 1,500 square foot condo?  No contest here.

I have no clue how these units are expected to move, and there are currently six units for sale in here, all on the 62nd floor.

Well, folks, tell me but I don’t see a lot of movement on these properties and others like them.  But if you’re asking yourself, “What is the highest price per square foot being asked anywhere in the city right now?”, it’s this one:

This is still in construction so you can’t see it in person, FYI.

But you can spend just shy of $4,000 per square foot to live on the 80th floor at Yonge & Bloor!

There’s no practical use for this unit, or the valuation therein.   Nobody is going to buy this as a primary residence but rather I think this will be bought by a prince from the Middle East or a hedge fund billionaire as a “pied-a-terre.”

This was an interesting experiment!

I’ll make a note to run the same feature again in the summer or fall and we’ll see how or if prices have changed…

Written By David Fleming

David Fleming is the author of Toronto Realty Blog, founded in 2007. He combined his passion for writing and real estate to create a space for honest information and two-way communication in a complex and dynamic market. David is a licensed Broker and the Broker of Record for Bosley – Toronto Realty Group

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9 Comments

  1. Ace Goodheart

    at 10:58 am

    This post really gets a person thinking.

    Back in June of 2021 I purchased a 2800 square foot (above ground level, not including the basement, which was unfinished, stone foundation) semi detached four bedroom, three bathroom house in Toronto’s Junction neighbourhood for a little over 1.4 million.

    Granted, it needed some renos, but after putting 300K into it, it is now very live-able.

    Total cost per square foot? $607.00

    This house includes a large backyard, garden shed, a patio, four large perennial gardens, a wooden deck, one legal front yard parking spot (licensed city of Toronto pad parking), a large front porch and three levels of finished living space.

    For $607 per square foot.

    This is not an unusual price in this area.

    You can walk to High Park subway station (about 10 min walking distance). There are currently a number of comparable houses for sale here for less than I paid for mine (price decrease is about 15-20% since February of 2022).

    So I am, like the blog post writer David, sitting here scratching my head.

    The $3,149,900 condo above (Concord Canada house) has neither a parking space, nor a locker, and it is almost four times the price per square foot as my semi detached house (though it does have a car wash, which I assume your condo fees help to pay for, to wash that car that you cannot park anywhere)?

    Why not just buy a house? They are much cheaper.

    1. Bryan

      at 1:04 pm

      It’s wild. On a lark, I took a quick look to see what you could get in Toronto for ~$3.15M right now. There are a lot of options, but my favourite is a detached house in Cabbagetown (Winchester St.) listed at $3.2M. Beautifully updated 3500+ sqft 3 story home with a 3 different bedrooms that have ensuite bathrooms, a backyard, garage, basement apartment with a separate theatre room also in the basement and AN ELEVATOR….

      I mean, as tempting as it is to drop $3M in City Place…..

      1. Ace Goodheart

        at 1:58 pm

        The condo prices make no sense.

        The 34 million dollar one at one Bloor doesn’t even have a parking spot.

        No parking.

        You can buy an estate up in the Bridal Path, with 30 parking spots and a 5 car garage, for less than that.

      2. Nobody

        at 2:42 pm

        I feel Cabbagetown prices themselves are crazy given how unsafe the area is and how you don’t have a walkable area near you nor a safe walk to king and bay for a commute. Rosedale/Summerhill/Moore Park offer much better value in that size range while also offering safe village environments and pretty safe commutes to king and bay without a car.

        Condos can be very good for people who travel A LOT and/or have higher security needs. Like a high profile hockey player, a senior lawyer or consultant with international clients and absurd amounts of travel, or someone who is spending lots of time at their place in Florida and their place in Muskoka. Lots of the fancier buildings downtown are full of people who use it as their main residence and who “work” in Toronto but are out of town more than half the time. A condo in this situation can be safer, easier, and cheaper to run than a house that you’d expect them to look at.

        Plus if you’re working long hours a 5 minute commute when you’re in the city is much nicer than even 20 minutes to midtown. If you don’t have kids or they’ve gone off to their own careers the backyard and space might not be that attractive.

        However 3MM for city place, or what Nazim Kadri is looking for his old condo on Richmond, rather than in a place like the Four Seasons, does seem insane to me.

        1. Bryan

          at 5:17 pm

          There isn’t an awful lot for sale right now, but for what it’s worth, my second choice in my random search was a $4M house in Rosedale. I thought it was far better value for the money, but didn’t think it was fair to compare it to the $3.2M condo.

          As far as condos go, I think the vast majority of people buying them are people who can’t afford the classic (and likely mythical at this point) “starter home” in the area they want to live….. and for the people who want to rent properties to this group. By definition though, the condos serving that group of people are likely limited to something like $1.5M (ish?). The people buying to live there can’t afford much more mortgage than that, and the people buying them to rent to those people will have a hard time getting enough rent from them to be cashflow positive with a mortgage that high. In short, people pay more per sqft than a house because they can’t afford the entry level house.

          Once prices go higher than that, I get confused for all the same reasons ACE mentions. Sure, there are likely a few niche groups(as you mention) that just don’t want to live in a house, but I have a really hard time imagining that group is big enough to justify the number of condos that are selling for the same price as houses that are more than double the size… even in the same neighborhoods! At ~$2M would a house in the junction or Greektown not be a better buy for the vast majority of people? At $3M you could get a pretty nice house in the Annex, which is every bit as “downtown” as most condos. At $4M, who is picking a condo over a house in Rosedale?

          Colour me confused.

  2. JF007

    at 12:27 pm

    And here i was thinking of selling my condo in North York for a measly 800$/sq ft :D:D:D

  3. Vancouver Keith

    at 11:32 am

    Condos are not just homes, they are skyvaults for investors. The price premium they are commanding has to do with their larger role as financial assets, not their liveability factor as a home. Houses are much more for living in than condo’s so the financialization extends only to the price of land.

    The investment demand for condos is simply far greater than it is for other classes of residential real estate – they are the entry level product for someone who want to become a real estate investor. If the real estate market goes through a significant correction, it will happen with condos first and deepest.

  4. Kyle

    at 2:42 pm

    I recall from your 2021 blog post, that the City mandates developers to build a certain percentage of 3 bedroom units . https://torontorealtyblog.com/blog/3-bedroom-condo-floor-plans-pass-or-fail/

    I think this is one of those unintended consequences of bad planning policy. Developers are forced to build something with limited market demand, so in order for the economics to work, they either build A) something exorbitant they can target to people with FU money or B) something cramped they can target to investors who are ok buying what essentially is a rooming house.

  5. Kiter Peter

    at 2:26 pm

    But do you believe that the building’s registration is the reason why costs are higher? Or is it just that they intended to keep a small number of units till after registration and then sell them for the highest price?
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