Toronto real estate prices have made some strange moves over the past couple of years. First was a rapid climb in all segments. Then detached prices started falling, while condo prices continued to climb. Now one of the most common questions people email us is, how close can a condo price get to a detached home?
It’s impossible to nail a direct number, but we can get an idea looking at historic trends. Today we’ll be looking at the price ratio of a condo to a detached unit in Greater Toronto. Then we’ll look at how this compares to the long-term trend, as well as how this ratio might change in the future.
We’re looking at the price ratio of a typical condo apartment to a typical detached home in Greater Toronto. A condo will usually be cheaper than a detached unit, of similar build quality and location. There are a few exceptions, but this is the rule since detached homes come with land – condos do not. Yes, a condo can be a lifestyle choice, and if you want to pay a lifestyle premium, go ham. However, a detached home is more valuable on fundamentals, so a gap is usually maintained.
The Price of Condo Vs. Detached Units
Let’s start with where we are, by looking at September’s numbers from the Canadian Real Estate Association (CREA). CREA data shows that a benchmark condo in Greater Toronto is $460,200 in September. Meanwhile, a benchmark detached is at $872,500. Basically, a condo is almost half the price of a detached home.
A Condo Is $412,300 Cheaper
The gap between the price of a condo, and detached unit has actually been dropping recently. A detached home was $412,300 dollars more than a condo in September, the smallest gap since May 2016. The largest gap was achieved in April 2017, when the price of a detached was $520,000 higher than a condo. We’re currently 20.71% below that peak. Here’s how that looks as an a dollar value.
The Ratio Is Over 7% Lower Than The Historic Trend
As a ratio, we’re seeing that gap start to rise again, and very quickly. The median price ratio of a condo to detached unit from 2005 to this year is 56.87%. Currently the ratio is 52.74%, over 7.26% lower than the median. In order for this ratio to return to the baseline, the ratio would have to rise another 7.83%. There’s a few ways prices would move to get this ratio higher, but let’s go through a quick example to illustrate how this trend might correct.
Source: CREA, Better Dwelling Calculations.
The easiest to understand movement would be condo prices rising, or detached homes dropping. If the benchmark condo price rises to $496,200, a 7.82% increase, we would hit that mean-line ratio. If a detached home drops to a benchmark of $809,500, a decline of 7.22%, we would also hit that meanline. It’s not all that complicated.
Now, that was a pretty blunt example to illustrate the ratio changes. It could be a combination of the two, or something entirely different. However, ratios like this tend to go back to the meanline at some point or another.
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