The first few months of the year are typically known to be quieter and less competitive in the Greater Toronto Area real estate market. This year, things are quite different thanks to extremely low inventory that is fueling buyer competition and tight market conditions.
In a new blog post, broker of record and founder of Strata.ca, Robert Van Rhijn, commented on the dearth of GTA condo listings and its impact on prices and overall sentiments.
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GTA condo listings peaked in October 2020 with a total of 8,428 units on the market at that time, according to Strata.ca. Since then, listings have been on a toward trajectory. In January, there were a total of 1,415 condo listings on the market, a sharp 63 per cent decrease from January 2021, which reported 3,811 available listings just 12 months ago.
“It’s not necessarily that a crush of buyers are flooding the market, although you could argue there is some of that happening,” explained Van Rhijn. “But rather, the competitive nature of today’s landscape is being fuelled by historically low inventory levels that continue to persist.”
Lack of listings keeps prices rising
Naturally, a shortage of listings is likely forcing condo prices higher.
In October 2020, GTA condo prices hit their lowest level since the start of the COVID-19 pandemic, falling to an average of $678 per-square-foot (PSF). As supply has since dwindled, the average price of a condo has been on the rise, jumping 34 per cent in 15 months to $910 PSF.
Van Rhijn noted that while it remains unclear whether prices will eventually level out, chronically-low inventory will “only exacerbate the issue.” Still, some agents at the brokerage say that an uptick of new listings will arrive in the coming months.
“I suspect we’ll see a lot of new inventory in March as sellers look to cash out during the busy spring market,” said Milan Mitrovic, a realtor with Strata.ca. “Many of those buyers will have purchased something and exited the market by spring, leading to less competition and a fairer playing field overall.”
Off-season, FOMO fueling sentiments
From interest rates to wintery weather, there’s a number of factors shaping buyer and seller sentiments right now that could be contributing to the lack of condo listings.
For one, Van Rhijn explains that sellers don’t want to list their properties right now during the winter, and unless they have no other option, are usually advised to wait until the spring market. The ongoing Omicron variant is also another point of concern.
“Omicron is still dominating the headlines, so some of my seller clients are closely monitoring how ongoing restrictions may impact the market,” said Mitrovic. “And then there are others who don’t want to list because they’re simply uncomfortable with people walking through their home when infection rates are still high. Whatever the reason, Omicron is making people think twice about listing, which is driving down inventory rates even further.”
On the flip side, buyer sentiments are being dominated by FOMO (the fear of missing out), and are trying to purchase ahead of probable interest rate increases this year. Van Rhijn notes that although interest hikes tend to be very minimal, the GTA is seeing a rush of buyers into the market who share a “now or never” mentality.
Coupled with sellers who don’t feel that now is a good time to list their home, this mindset is creating a perfect storm of inventory shortages.
“These competing sentiments are essentially swirling together to create a ‘perfect cocktail’ exacerbating the current inventory phenomenon,” said Van Rhijn.