Real estate news in Kitchener-Waterloo was absolutely dominated in 2020 by massive increases in sales prices year over year in every part of the housing market. And when the average sale price of a single detached home surged above $850,000 for the first time ever just this past month, eclipsing even the 16.9% average increase we saw between December of 2019 and December of 2020, why wouldn’t this red-hot segment continue to make all the headlines?
The story of supply and demand that’s driving the jaw dropping prices we’re seeing right now is defined by the relatively finite nature of traditional single-family housing in Waterloo Region. As our major urban centres strain at their borders, land that’s available for the development of detached homes and semis is scarce, and resale inventory even when combined with limited new housing starts simply isn’t up to meeting the demand for housing from individuals and families who are seeking to settle in our area.
Despite this growth, the rapid development of Kitchener-Waterloo in particular from a small-to-medium sized centre into an urban area with an increasingly distinct sense of the ‘big city’ about it hasn’t best been characterized by upward pressure on the prices of single-family homes, but rather by the boom these past several years in the construction of high-rise condominium apartments reminiscent of what you’ll see across the GTA. Massive cranes – once a rarity here – have seemingly turned into regular fixtures of the Kitchener-Waterloo skyline, as we continue to receive word of new development after new development, some of which are now planned to exceed 40 storeys.
The vast majority of these new buildings are being concentrated in two areas: firstly, along the King Street corridor (the arterial urban route between Downtown Kitchener and Uptown Waterloo), and secondly within the Northdale area of Waterloo (known mainly as a hotspot for off-campus student housing). The pace of development in both areas was kick-started by news of the long-heralded arrival of the light rail system, which became a reality in the summer of 2018, as well as by the increased infrastructure spending that came along with the construction of a brand-new public transit system. And, if we can set the drama of the ongoing single detached market aside for a couple minutes, I believe there’s a big story to be found in why the pace of development of these massive condo buildings is only seeming to accelerate as we carve deeper into 2021.
In reality, the focus on high density downtown development shouldn’t take anyone by surprise – this has been the goal of our regional government’s official plan for growth since 2010 at the very latest. The Region of Waterloo’s Official Regional Plan (found here for reference) has served for over a decade as a roadmap for urban intensification and the development of supporting infrastructure. It all started out of a key recognition that our region’s major centres are already squeezed right up against their borders, and that any realistic plan to accommodate the projected increase in population between now and 2031 will force us to make more efficient use of existing lands.
It’s a logical outcome, then, that prices for detached homes would spike as soon as the pace of the development of new subdivisions slowed and demand picked up. This is a phenomenon that’s only been accelerated over this past year by the impacts of COVID – namely by driving city dwellers in larger Ontario markets like the GTA to seek more spacious and price-friendly housing alternatives in Southwestern Ontario, only adding more pressure to an overheated local market already experiencing an all-time shortage of inventory.
Now, enter the condo market – primed to step up and fill this demand.
While I’ve never personally been particularly bullish on the investment prospects of apartment-style condos (multi-unit, student housing and properties with great potential for duplexing are my go-to favourites), there’s no doubt that condos will have an increasingly important part to play in our housing market over the long term – and especially for the many prospective buyers (both younger and first-time) who are finding themselves now priced out of more traditional ‘entry level’ detached homes and semis.
A quick review of the recent sales statistics in our area for condos will show you what I mean. Over the course of 2020, a total of 804 units were sold in Kitchener-Waterloo, representing an increase of nearly 20% over 2019’s numbers. At the same time, the average sale price for an apartment style condo in 2020 climbed to over $390,000 – another increase over 2019’s statistic by 13.7%. Just this past month, in January of 2021, a total of 71 units changed hands. This is a staggering increase of 97% over the number of units moved in January of 2020. Furthermore, I conducted a sampling of 93 apartment style condo units in the Kitchener-Waterloo market to have been sold firm in the past 90 days. These sales added up to an average sale price of more than $402,000 – and sold at an average 104% of their asking price. All of this demonstrates a strong market for these types of properties, despite more inventory coming online in the form of new developments each month.
To sum up, apartment style condos will be a critical part of our housing market for decades to come and will, I believe, draw ever-increasing amounts of attention from first-time buyers as the region’s demographics continue to change. I feel that the condo market will remain stable for the foreseeable future and represents a great alternative for people who are frustrated at the current state of the detached resale market. If you have any questions at all and are considering a local condo as either a primary residence or an investment, I encourage you to reach out to me directly. I am always happy to talk real estate!
