Condominium prices could see a big increase in value this year as low-rise homes become even more financially prohibitive and housing demand continues to outstrip supply.

Online brokerage Zoocasa says the gap between high-rise buildings and low-rise buildings is the second widest it has ever been. Comparing the prices of the two segments in Toronto between 2011 and 2021, condos cost half of what single-detached homes cost. According to the report, the ratio fell from 1.99 to 2.33 and hasn’t been this high since the introduction of the B-20 mortgage stress test in January 2017, months before Ontario introduced a 15% levy on foreign buyers, to mitigate the rising rate of appreciation in GTA home prices.

“Usually when we see single-detached home prices slow, condominiums grow. Heading into the new year, major bodies like the Toronto Regional Real Estate Board expect price appreciation to slow from the record pace we saw in 2021, and rising interest rates interest will only make the more affordable homes on the market more attractive. I predict we’re going to see a big year for condos in the area,” said Zoocasa realtor Ross Aitken.

“In the first month of 2022 alone, the average condo price in the area increased by $36,000. The market is changing rapidly, largely because buyers are optimistic and excited to return to enjoy an urban lifestyle after nearly two years of recurring closures.

Higher mortgage rates to fuel demand for cheaper home types

Zoocasa has GTA-based single-family homes averaging $1,741,318 and condos at $748,566, which it says is partly a result of the GTA-wide space race. the province in the age of COVID-19. Additionally, while condo appreciation slowed through 2020, that changed in January 2021 when condo sales increased 90% year-over-year in the first two weeks of the month.

With such a wide spread, there are good reasons to anticipate greater growth in the GTA condominium market. For starters, the Bank of Canada is widely believed to raise its overnight interest rate in March, the first of six increases over the next 18 months, which will drive more buyers out of the single-family home market, like this happened in 2018 when rates lasted. increased, and also when prices were lower. When interest rates last rose, sales of all product types in the GTA slowed before growing for townhouses and condominiums by 9% and 10%, respectively, while single-detached home prices rose only 4%. Similarly, Zoocasa believes condos will lead growth across all housing segments in 2022.

Read: Take a (rate) hike: Canadian housing market optimism hits record high

“Taking inspiration from 2018, when interest rates last rose, we can predict that the most affordable prices on the market, such as condos and townhouses, will lead growth in 2022 due to lower costs. higher borrowing rates,” said Lauren Haw, CEO of Zoocasa.

Life to return to urban cores

Rolling back pandemic restrictions will also make city life more attractive. Much like when Toronto saw an exodus in the early months of the COVID-19-induced lockdown, the reverse that’s happening is a reasonable expectation. In fact, many provinces have already removed some restrictions, with Ontario announcing on Monday that it was following suit. Additionally, excessive rental demand has already returned to the city, a sign that the property market is also taking off, as downtown Toronto regains its status as Ontario’s top destination to live, work and play.

So far this year, the housing market across all product types has been fierce, Aitken said.

“What today’s buyer needs to know is that success really starts with due diligence. Properties are moving fast in this market, if you’re serious you need to be able to compete. This means your mortgage pre-approval is complete and your attorney is ready to review the status certificate.