For four months, Christopher Bibby anguished over how to sell a 435-square-foot condo in Toronto’s entertainment district. The unit, which was listed in March at $569,999, wasn’t visited once in its first two months on the market. There were no calls and no emails. “Those were dead months,” he said.
Bibby already thought he was giving buyers a bit of a break. He had sold a condo of the same size, with the same floor plan and in the same building for $580,000 in February. But that was before COVID-19 upended Toronto’s condo market.
After two months, Bibby trimmed the price even further to $529,999 and, coupled with loosening lockdown restrictions, that generated enough interest to do a showing every 10 days. Still, there were no offers.
It wasn’t until mid-June that Bibby and the unit’s owner were able to finally fill the unit — after putting it up for rent at a below-market rate.
Bibby’s experience is representative of a wider trend in Toronto, where it appears that these smaller units are weighing down the entire market.
According to research firm Urbanation Inc., sales of condos sized at 500 sq. ft. and under were down 20 per cent year over year in September, while sales for units of other size ranges were either flat or still positive. These micro units are also the only condos on the market to have experienced a price decline thus far. And, thanks to a tumbling sales-to-new-listings ratio, they’re the only form of housing that is firmly in buyer’s-market territory.
“It’s become clear that COVID-19 has caused two shifts in demand: A desire for more space and more value-oriented homes outside the core, both of which negatively impact the market for small condos,” said Shaun Hildebrand, president of Urbanation.
Pre-COVID-19, these condos were the hottest on the market. Investors flocked to them because they were the only form of housing under $500,000 available in Toronto and the high rents they could charge on these units meant that making profit was close to a sure thing. Most of them were snatched up on the pre-construction market and as investors became more emboldened by their returns, they bought more units, Hildebrand said.
Now they’re the ones flooding the market with listings. In September, new listings for micro units were up 165 per cent year over year. So many of these condos have hit the market, that active listings now represent 5.2 months of supply. Hildebrand said it is considered a buyer’s market when supply reaches four months.
COVID-19 turned the tide on the momentum surrounding these condos. The same people who were living in these units no longer need to be near their downtown office buildings because many of them are closed; they also can no longer enjoy the benefit of being steps away from theatres, sports arenas and restaurants that sit empty. As the
Financial Post recently reported
, many former Toronto condo owners and renters have left Toronto altogether for Hamilton.
The pandemic has all but erased the premium that tenants once had to pay for living in the downtown core, Hildebrand said. That premium usually meant paying an additional $400 in rent for an identical unit outside the core. Now, it stands at $50.
With rent coming down across the board for condos, tenants are trying to stretch every dollar, Bibby said. If $2,000 per month got them a 500 sq. ft. unit pre-pandemic, it might be enough to get them 550 sq. ft. now or perhaps 600 sq. ft. outside of the downtown core.
“With work-from-home becoming a norm, the idea of being locked in a 450-sq.-ft. condo, without access to the building’s gym, party room or rooftop patio just isn’t appealing,” Bibby said. “An extra 50 square feet makes a difference.”
Frank Polsinello, a broker of record at RE/MAX, has seen this sentiment play out in the digital ads he places on Facebook for micro condos. In the past, the comments would be lined with interested people tagging agents to see the property. Now, they’ve turned negative.
“What we’ve been seeing a lot is: ‘Why would I pay $600,000 for that 453-sq.-ft. closet?’” Polsinello said. He’s had no problem with selling larger units, but he recently had a micro condo on the market for two months without receiving a single phone call from an interested party.
Micro-condo owners are struggling to sell and rent their units because two of the main groups of people they once attracted — recent immigrants and students — are no longer clamouring for them. Immigration has slowed to a crawl during the pandemic, while the majority of university classes are being held online.
Why would I pay $600,000 for that 453-sq.-ft. closet?
There is still some interest in the units, particularly from first-time homebuyers who were previously renting and took advantage of a down market, multiple realtors told the Post. But that interest is scant. That the units are hard to distinguish from one another because the floor plans are rarely unique only compounds the problem.
“We’ve had a few that we have taken off the market recently because there’s a glut,” Polsinello said. “We’re constantly monitoring the inventory. If we see there are six, eight, 10, 12 of these things that are all identical, (buyers) have the pick of the litter and it’s going to keep driving the price down.”
And that means that for the first time in years, buyers are in control.
Vanessa Jeffrey, the broker of record at RE/MAX’s Property Shop, said she recently secured a 475-sq.-ft. condo in downtown Toronto for a client with a $450,000 bully offer when similar units had recently sold for $510,000.
“We knew they weren’t getting showings,” Jeffrey said.
Not only was their bid price accepted, but the owner agreed to her client’s conditions as well, including an inspection. In the past, asking for one would’ve automatically lost you a unit, Jeffrey said. Then, when the inspection turned up a few faucets that were leaking and a door that needed to be replaced, the owner agreed to take care of the repairs.
On the pre-construction market, Sergio Menezes, a sales representative at Condo Connect, said developers are making similar concessions to draw investors back into buying their micro units. Many have introduced what he referred to as a drawn out deposit structure. Normally, investors have to put down 15 per cent in one year to secure these units, he said, but now, they’re being given the choice of paying five per cent each year over a period of three years. Cheaper lockers and parking spaces have also been placed on the negotiating table.
Moving forward, Hildebrand expects further weakness in the market for micro condos. Although sales prices have dropped, they’ve only done so by one per cent so far. The current supply on the market suggests that further drops could be coming, he said, especially as developers wrap their work on pre-construction units and bring more of them to market.
How quickly the market recovers is directly tied to COVID-19, he said.
“How long demand will be impacted depends on how the downtown market recovers, which is an evolution of the current health crisis,” Hildebrand said. “When does immigration bounce back? When do students return? When do office workers go back into their offices? It’s hard to say, but in the near term it looks likely that prices are going to trend lower.”
TORONTO – The Toronto Regional Real Estate Board says home sales in October surged as buyers continued moving off the sidelines amid lower interest rates.
The board said 6,658 homes changed hands last month in the Greater Toronto Area, up 44.4 per cent compared with 4,611 in the same month last year. Sales were up 14 per cent from September on a seasonally adjusted basis.
The average selling price was up 1.1 per cent compared with a year earlier at $1,135,215. The composite benchmark price, meant to represent the typical home, was down 3.3 per cent year-over-year.
“While we are still early in the Bank of Canada’s rate cutting cycle, it definitely does appear that an increasing number of buyers moved off the sidelines and back into the marketplace in October,” said TRREB president Jennifer Pearce in a news release.
“The positive affordability picture brought about by lower borrowing costs and relatively flat home prices prompted this improvement in market activity.”
The Bank of Canada has slashed its key interest rate four times since June, including a half-percentage point cut on Oct. 23. The rate now stands at 3.75 per cent, down from the high of five per cent that deterred many would-be buyers from the housing market.
New listings last month totalled 15,328, up 4.3 per cent from a year earlier.
In the City of Toronto, there were 2,509 sales last month, a 37.6 per cent jump from October 2023. Throughout the rest of the GTA, home sales rose 48.9 per cent to 4,149.
The sales uptick is encouraging, said Cameron Forbes, general manager and broker for Re/Max Realtron Realty Inc., who added the figures for October were stronger than he anticipated.
“I thought they’d be up for sure, but not necessarily that much,” said Forbes.
“Obviously, the 50 basis points was certainly a great move in the right direction. I just thought it would take more to get things going.”
He said it shows confidence in the market is returning faster than expected, especially among existing homeowners looking for a new property.
“The average consumer who’s employed and may have been able to get some increases in their wages over the last little bit to make up some ground with inflation, I think they’re confident, so they’re looking in the market.
“The conditions are nice because you’ve got a little more time, you’ve got more choice, you’ve got fewer other buyers to compete against.”
All property types saw more sales in October compared with a year ago throughout the GTA.
Townhouses led the surge with 56.8 per cent more sales, followed by detached homes at 46.6 per cent and semi-detached homes at 44 per cent. There were 33.4 per cent more condos that changed hands year-over-year.
“Market conditions did tighten in October, but there is still a lot of inventory and therefore choice for homebuyers,” said TRREB chief market analyst Jason Mercer.
“This choice will keep home price growth moderate over the next few months. However, as inventory is absorbed and home construction continues to lag population growth, selling price growth will accelerate, likely as we move through the spring of 2025.”
This report by The Canadian Press was first published Nov. 6, 2024.
HALIFAX – A village of tiny homes is set to open next month in a Halifax suburb, the latest project by the provincial government to address homelessness.
Located in Lower Sackville, N.S., the tiny home community will house up to 34 people when the first 26 units open Nov. 4.
Another 35 people are scheduled to move in when construction on another 29 units should be complete in December, under a partnership between the province, the Halifax Regional Municipality, United Way Halifax, The Shaw Group and Dexter Construction.
The province invested $9.4 million to build the village and will contribute $935,000 annually for operating costs.
Residents have been chosen from a list of people experiencing homelessness maintained by the Affordable Housing Association of Nova Scotia.
They will pay rent that is tied to their income for a unit that is fully furnished with a private bathroom, shower and a kitchen equipped with a cooktop, small fridge and microwave.
The Atlantic Community Shelters Society will also provide support to residents, ranging from counselling and mental health supports to employment and educational services.
This report by The Canadian Press was first published Oct. 24, 2024.
Housing affordability is a key issue in the provincial election campaign in British Columbia, particularly in major centres.
Here are some statistics about housing in B.C. from the Canada Mortgage and Housing Corporation’s 2024 Rental Market Report, issued in January, and the B.C. Real Estate Association’s August 2024 report.
Average residential home price in B.C.: $938,500
Average price in greater Vancouver (2024 year to date): $1,304,438
Average price in greater Victoria (2024 year to date): $979,103
Average price in the Okanagan (2024 year to date): $748,015
Average two-bedroom purpose-built rental in Vancouver: $2,181
Average two-bedroom purpose-built rental in Victoria: $1,839
Average two-bedroom purpose-built rental in Canada: $1,359
Rental vacancy rate in Vancouver: 0.9 per cent
How much more do new renters in Vancouver pay compared with renters who have occupied their home for at least a year: 27 per cent
This report by The Canadian Press was first published Oct. 17, 2024.
