For years, one of the hottest segments of the Toronto real estate market was condominiums. The skyline of the Big Smoke had been lined with construction cranes and glass towers rising on nearly every corner of the downtown core. Indeed, views of the city from Centre Island have vastly changed over the last decade. The upward trajectory suggested that there was no slowing down for red-hot condos.
Then, the coronavirus pandemic struck and everything was turned upside down, including the Canadian real estate market. Suffice it to say, Toronto’s condominiums took a downturn in 2020. While sales activity was moderate, prices had notably slumped. The reason? Supply had outpaced demand amid families leaving the city, up-sizing their living situation by moving into a detached or semi-detached home, not to mention the temporary ban on Airbnb units. But all this may soon be ancient history.
Could it be morning again in the Toronto condo market?
Now that the COVID-19 public health crisis is subsiding, the Toronto condo market is returning to life, rebounding to its best level in about three years. With renewed demand and historically low interest rates, residents will likely witness even more construction cranes dotting the skyline of North America’s fourth-largest city.
The Toronto Condo Market Springs Back to Life
According to the Toronto Regional Real Estate Board (TRREB), residential sales for Toronto condominiums soared 159.1 per cent year-over-year to 1,881 units in May.
The average price of a condo unit in the 416 area rose at an annualized rate of 0.1 per cent to $694,152. However, TD Bank believes that benchmark prices are doing even better than industry data, pegging the number at 10.6 per cent from the same time a year ago. This would be the strongest gain since 2018.
“Though overshadowed by the superheated detached market, condos are quietly making a comeback,” said TD economist Rishi Sondhi, in an interview with the Financial Post. “Should condo sales consume a rising share of the market moving forward (as we expect), downward pressure on average home prices from these lower-priced units would be applied.”
Overall, it has been a great start to the year for the city’s condo industry. In the first quarter, sales advanced at an annualized rate of 79.7 per cent to 9,398 units. During the January-to-March period, the median sale price for condominium apartment units climbed 1.4 per to $592,000 compared to the same time last year.
So, what could be driving these positive trends?
The Ins and Outs of the Toronto Condo Market
Across all property segments, demand has been strong in 2021. While this was business as usual for detached and semi-detached homes throughout the pandemic, demand has dwindled within the condo market over the course of this year.
TRREB President Lisa Patel explained in a news release that confidence in the post-pandemic economic recovery is creating a splash in the Toronto real estate market and the broader Canadian housing sector. The other crucial aspect has been historically low borrowing rates, with the Bank of Canada (BoC) signalling that it is unlikely to raise interest rates until the second half of 2022.
Although Patel believes that “the absence of a normal pace in population growth” has been a factor in these demand slumps, the federal government will soon relax tough border restrictions, reigniting immigration levels. For the last decade or so, the population boom in the city centre and Greater Toronto Area (GTA) was one of the biggest drivers of the Toronto condo market.
As the public health crisis wanes, one of the top questions is: What about the short-term rental market? The province of Ontario banned Airbnb units in the early days of the pandemic in response to the surge in infections. This led to a substantial drop in rental prices of as much as 20 per cent since owners had to list their suites as long-term rentals. It might seem like conditions will return to normal in the coming months, but city hall adopted new rules.
This past spring, the municipal government approved three new rules that experts suggest could hurt the short-term rental industry in one of the world’s hottest real estate markets. The measures?
- Registration of Airbnb units and a $50 annual renewal fee.
- A four per cent municipal quarterly tax.
- Airbnb must be your primary residence.
Ultimately, moving forward, it will be a different type of new normal for the condo market.
Is Toronto on Fire Again?
The Globe and Mail ran a piece at the end of May showcasing the selling traits of several condominiums. For example, a 754-sq.-ft. one-bedroom-plus-den-unit sold for $669,908 after just one day on the market, a little more than $10,000 above the asking price.
Put simply, the Toronto condo market is now experiencing the same characteristics as the broader real estate market: bidding wars, above-asking price transactions, and sky-high prices. Hopeful urban homebuyers anticipating a COVID-discount on a 2 bedroom condo in the heart of the city, may be sorely disappointed!