We regularly work with buyer clients looking to buy a condo apartment in Toronto. Some are first-time home buyers looking to get into the market, some are moving up to a bigger, brighter condo and some are investors who want secure, steady rental income.
A question we are getting from many of these buyer clients is whether now is the right time to buy a condo in Toronto.
The COVID-19 pandemic has dramatically impacted the real estate market in Toronto and the GTA as a whole. While making a major purchase in times of uncertainty may seem illogical, the idea of having your own home that you can be safe in makes a lot of sense given what is going on right now.
At the same time as having a place of your own is appealing, the impacts of COVID on the condo market have been significant. Let’s look at it from the perspective of the two crucial levers on price, supply and demand.
Supply
When we look at the number of active condo apartment listings for Toronto in the past year, we see a pretty clear trend.
| Jan ’20 | 1,246 |
| Feb ’20 | 1,256 |
| Mar ’20 | 1,582 |
| Apr ’20 | 1,810 |
| May ’20 | 2,201 |
| Jun ’20 | 3,070 |
| Jul ’20 | 3,814 |
| Aug ’20 | 4,564 |
| Sep ’20 | 5,423 |
As of today, October 9, 2020, we’re up another couple hundred units to about 5,600.
If you were looking to buy a condo apartment in Toronto now, you’d have three times as many options as back in April. In fact, the September 2020 number of 5,423 active condo listings was the highest in our recorded history. You’ve literally never had as many condo apartment options as right now.
What’s causing this increase in supply? We know of at least a few factors:
- There are a significant number of investor owned condo apartments in the city. Some were long-term rental units, and some were short-term rental units (AirBnB). Two significant groups in the rental market are new immigrants to Canada and students. Immigration has effectively stopped as a result of COVID and the majority of post-secondary schools have moved to online or virtual classes, meaning there is no requirement to live close to campus. A number of these investor owned condo apartments have been placed on the market as landlords decide now is the time to cash out on their appreciation.
- In a related aspect, with the average rent in Toronto falling for the fifth consecutive month, now is not the most appealing time to purchase an investment property – at least in the short term. Restrictions on landlord’s ability to evict problem tenants due to COVID is another fact that means a number of investors are holding off on making any income property purchases, of which condos are the most popular and affordable option.
- Builders start condo developments in one market and complete them in another. Two or three years ago when many new buildings were being started, no one anticipated COVID. We’ve had new buildings come into the market at a time when resale units are sitting, further increasing the supply.
We’ve got significant supply side factors that have dramatically increased the number of condo apartments on the market. Let’s look at the other side of the equation, demand.
Demand
On the demand side, we’ve seen a steady level of sales. Here’s the year so far in terms of number of sales of condo apartments.
| Jan ’20 | 918 |
| Feb ’20 | 1,329 |
| Mar ’20 | 1,391 |
| Apr ’20 | 481 |
| May ’20 | 726 |
| Jun ’20 | 1,281 |
| Jul ’20 | 1,685 |
| Aug ’20 | 1,536 |
| Sep ’20 | 1,549 |
The numbers of sales are actually pretty typical for Toronto. Our September 2020 sales were around 1,550 and September 2019 condo apartment sales were 1,447. About a hundred fewer sales than last year, which is about 7% fewer number of sales.
We often hear talk about how condo sales are down because buyers don’t want to live in shared space during a pandemic. That makes intuitive sense to us, but the sales being relatively similar to prior years shows us that we haven’t seen an all out exit of condo buyers.
We can think of a few factors that influence demand for condo apartments right now.
- With rental rates dropping, a number of tenants who were considering a move to buy a condo may decide that now is not the time. Continuing to rent and not committing to a purchase during an uncertain time makes a lot of sense.
- With condo apartments the most affordable purchase option for buyers, there are many buyers who have had their income and savings impacted by COVID. Whether it a job being lost or simply uncertainty about continued employment, the entry level condo buyer is more likely to be impacted by COVID related money issues than a freehold home purchaser who is likely more established in their career.
- The boom in freehold (such as detached, semis and townhouse) properties is likely driven in part by those buyers who decide they would rather invest more into a home that doesn’t share common areas like hallways and elevators and has your own private outdoor space. If a buyer has the option of purchasing a freehold home rather than a condo apartment, it is likely some will decide now is not the time for the condo purchase.
There are of course economic factors that influence demand as well. With mortgage rates at all time lows in Canada, we are likely seeing less of a drop in demand than we would otherwise be seeing. In essence, the government adjustments to the overnight rate has lowered mortgage rates, which has stimulated some demand across the board, including condo apartments.
What has been the impact of the supply and demand levels on the average price for a condo apartment in Toronto? Not a tremendous amount as of yet.
| Jan ’20 | $679,310 |
| Feb ’20 | $723,119 |
| Mar ’20 | $713,089 |
| Apr ’20 | $612,704 |
| May ’20 | $674,253 |
| Jun ’20 | $672,283 |
| Jul ’20 | $683,266 |
| Aug ’20 | $673,165 |
| Sep ’20 | $686,191 |
We’ve seen some fluctuations, but September is the highest average sale price since March 2020. It is likely we are seeing the average price impacted by the higher sale price of unique condo apartments such as lofts.
Regardless, there is not a plummeting sale price for condos in the city. As is always the case, you can find examples of properties that have lost value recently but that is more a function of the inherent appeal of the property versus the current market. In any market, good properties do better than bad properties.
The question as to whether now is a good time to buy a condo has, at its heart, a very individual answer.
- If you value proximity to the amenities that condo apartments are located close to, then you have more options than ever for a purchase and now is a great time to buy.
- If you want to get onto the property ladder and will not be able to afford the rapidly increasing prices for freehold homes, then buying a condo apartment now is a great option.
- If you have long-term plans that involve being in the city and commuting is either not desirable or feasible, then buying a condo makes sense.
In contrast, if you were only considering a condo for reasons related to your school or work and that has changed significantly – both currently as well as long-term – then perhaps a condo is not the right choice.
If you want to work through what makes sense for you, we’d be happy to chat further.
