While single-family home sales were on fire during the summer market’s recovery, Toronto’s condominium segment has been charting its own less encouraging path, as it continues to be impacted by increasing inventory levels and higher rental vacancies caused by the pandemic.
“It’s a challenging time selling condos right now. There’s a dislocation between sellers’ expectations and buyers’ expectations and where prices are and where they should be,” said Matt Smith, a real estate broker with Engel & Völkers Toronto Central Brokerage. “It’s resulting in a bit of a lack of sales volume at the moment.”
The challenges the condo market is facing can be traced back to a slowdown in Toronto’s rental market. A sharp drop in immigration, coupled with fewer students moving to the city, has smothered demand for rental units. A large number of condos used as short-term rentals through platforms like Airbnb are also sitting empty as tourism and business travel remains low and new restrictive rules around short-term rentals that recently came into effect. These factors have led many condo investor-owners to sell their rental properties in a relatively short period of time.
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Ralph Fox, broker of record and managing partner at Sage – Fox Marin Associates Ltd, Brokerage, explained that Toronto investors who purchased condo units years ago are now sitting on a ton of equity, a motivating factor to list if new tenants aren’t available.
“It’s the inventory that’s sitting out there, the inability for investors to rent out their units and some people [who are] considering moving out of the city, which is really causing all of this inventory to come online,” said Fox.
While the Toronto Regional Real Estate Board’s (TRREB) September market data is not yet available, anecdotally, agents have noted a shift in the condominium market. Across all price segments, Smith has observed a lull in condo sales since the summer ended and the weather started to turn. However, as inventory increases, eventual downward pressure on pricing could be the signal for condo buyers to jump in.
“It’s slowly turning into a buyer’s market. We’re trying to get [sellers] to be more negotiable,” said Smith. “Not all of them are there yet, but I think in the coming months, they’re going to become a lot more negotiable and that’s what the buyers are waiting for, because inventory is starting to build up.”
Some types of condominiums are seeing more attention than others. Kori Marin, fellow managing partner and broker at Fox Marin Associates, said that the team recently sold a condo in High Park for over asking in a multiple offer scenario. A former mansion that was converted into suites, Marin says that the property’s home-like character, outdoor space and low-maintenance needs drew the attention of buyers.
“I think [with] condos, it’s really going to come down to uniqueness,” said Marin. “If they are going to sell in a more unique marketplace with more supply, outdoor space has a lot of value, smaller boutique neighbourhoods have a lot of value.”
“All of these kinds of characteristics that make condos feel more residential versus feeling more hotel-like, rather than the bigger towers make them more saleable,” she added.
Smith noted that units with dens or larger condominiums, particularly in the 1,000 to 1,500 square foot range, are also selling well. Some of this sales success can be attributed to empty nesters who are downsizing, but still want to maintain a presence in the city.
“That little bit of extra space makes a difference, especially when a lot of these buildings’ amenities are starting to close down again,” said Smith.
Toronto’s current condominium market can present opportunities for first-time buyers who were previously priced out. Competitive pricing compared to years past and an increase in listings around downtown university neighbourhoods are an option for those thinking into the future.
“I think it would be an amazing time for people who have not been able to get something at an exceptional price,” said Marin. “And it’s people who are thinking long-term, and thinking really smart.”