Condos come back to life in Toronto’s real estate market
For years, one of the hottest segments of the Toronto real estate market has been condominiums. The Big Smoke skyline was lined with construction cranes and glass towers rising from almost every corner of downtown. Indeed, the views of the city from Center Island have changed dramatically over the past decade. The upward trajectory suggested that there was no slowdown for the red-hot condos.
Then the coronavirus pandemic struck and everything changed, including the Canadian real estate market. Suffice it to say, Toronto condominiums experienced a slowdown in 2020. While sales activity was subdued, prices had dropped significantly. The reason? Supply had exceeded demand amid families leaving town, expanding their living environment by moving into a single or semi-detached house, without forgetting the temporary ban on Airbnb accommodation. But all of this may soon be a thing of the past.
Would it still be morning in the Toronto condo market?
Now that the COVID-19 public health crisis is easing, the Toronto condo market is coming to life, bouncing back to its best level in about three years. With renewed demand and historically low interest rates, residents are likely to see even more construction cranes dot the skyline of North America’s fourth largest city.
Toronto’s condo market comes to life
According to the Toronto Regional Real Estate Board (TRREB), residential condominium sales in Toronto climbed 159.1% year-on-year to 1,881 units in May.
The average price of a condo in Area 416 increased at an annualized rate of 0.1 percent to reach $ 694,152. However, TD Bank estimates benchmark prices are doing even better than industry data, setting the number at 10.6% from the same period a year ago. It would be the biggest gain since 2018.
“Although eclipsed by the market for overheated single-family homes, condos are quietly making a comeback,” said TD economist Rishi Sondhi, in an interview with the Financial post. “If condo sales consume an increasing share of the market in the future (as we anticipate), downward pressure on the average house prices of these low-priced units would be applied. “
Overall, it was a great start to the year for the city’s condominium industry. In the first quarter, sales grew at an annualized rate of 79.7 percent to 9,398 units. During the January to March period, the median selling price of condominium apartments climbed 1.4 per cent to $ 592,000 from the same period last year.
So what could be behind these positive trends?
The Ins and Outs of the Toronto Condominium Market
In all segments of real estate, demand was strong in 2021. While business has gone as usual for single and semi-detached homes throughout the pandemic, demand has declined in the condominium market. during this year.
TRREB President Lisa Patel explained in a press release that confidence in the post-pandemic economic recovery is causing a stir in Toronto’s real estate market and across the Canadian housing sector. The other crucial aspect has been historically low lending rates, with the Bank of Canada (BoC) signaling that it is unlikely to hike interest rates until the second half of 2022.
Although Patel believes that “the lack of a normal rate of population growth” has been a factor in these demand slumps, the federal government will soon ease strict border restrictions, reviving immigration levels. Over the past decade or so, the demographic boom in the downtown and Greater Toronto Area (GTA) has been a major driver of the Toronto condominium market.
As the public health crisis eases, one of the main questions is: what about the short-term rental market? The province of Ontario banned Airbnb units early in the pandemic in response to the spike in infections. This led to a substantial drop in rental prices of up to 20 percent since owners had to list their suites as long-term rentals. It may appear that conditions will return to normal in the coming months, but the town hall has adopted new rules.
Last spring, the city government approved three new rules that experts say could hurt the short-term rental industry in one of the world’s hottest real estate markets. Measures?
- Airbnb unit registration and annual renewal fee of $ 50.
- A quarterly municipal tax of four percent.
- Airbnb must be your primary residence.
Ultimately, in the future, it will be a different kind of new standard for the condominium market.
Is Toronto still on fire?
The Globe and Mail published an article at the end of May presenting the sales characteristics of several condominiums. For example, a 754 square foot. The one-bedroom and den-den unit sold for $ 669,908 after just one day on the market, just over $ 10,000 above the asking price.
Simply put, the condo market in Toronto is now experiencing the same characteristics as the real estate market in general: bidding wars, above-demand price transactions and exorbitant prices. Optimistic urban homebuyers who expect a COVID discount on a 2-bedroom condo in the heart of the city may be very disappointed!