Behold, the Canadian condo market joins the COVID-19 real estate frenzy – Global News

Canada’s COVID-19 housing market extravaganza has, until recently, ignored condominiums. But no longer.

In the Greater Toronto Area, condo prices were down 3.7 per cent annually in February and in Greater Vancouver up by a puny 2.5 per cent, even as both cities saw detached home values rise by double digits.

But the demand for apartments is coming back — and fast.

In Toronto, 41 per cent of condos sold for more than the seller’s asking price last month, according to John Pasalis of real estate brokerage Realosophy.

Excluding the pre-pandemic peak of February and March 2020, it’s the largest share of sales priced above asking since 2017, before the introduction of the federal mortgage stress test for buyers with a down payment of 20 per cent or more.

In Vancouver, where overall home sales were up 74 per cent annually in February, the rising tide of the residential real estate market is “lifting all boats,” according to Steve Saretsky, a real estate agent with Oakwyn Realty.

According to the Real Estate Board of Greater Vancouver, the ratio of sales to active listings for condos is 42 per cent, which Saretsky says is the highest ratio since 2018.

“This is an early indicator that prices will head higher,” assuming the trend holds, Saretsky wrote in a recent report.

The spike in sales volume is concentrated in Toronto and to a lesser extent in Vancouver, with other major cities like Montreal, Ottawa and Calgary seeing significantly lower levels of activity, according to Phil Soper, president of Royal LePage.

And while end users and especially first-time homebuyers looking for larger homes away from downtown cores drove the real-estate frenzy of the latter half 2020, the resurgent demand for condos is all about investors, Soper adds.

“People who will be landlords are seeing the vaccine rollout around the world. They’re seeing the government’s commitment to bring back foreign students and to kick start immigration again,” he says.

There’s little doubt that rock-bottom borrowing costs are also helping to fuel investor demand, Pasalis, Soper and Saretsky agree. Although mortgages rates have begun to creep up from the record lows they reached in the summer of 2020, they remain at historically very low levels.

And while Bank of Canada (BoC) Governor Tiff Macklem recently said the country’s housing market is starting to see signs of “excess exuberance,” the central bank hasn’t given any indication it is pondering an interest rate hike in the near future.

In its latest interest rate decision on March 10, the BoC reiterated it is committed to keeping its trend-setting rate on hold until inflation is back to around two per cent, something the bank does not expect until some time in 2023.

“Everybody sees the writing on the wall … and the Bank of Canada keeps hammering it home, that we’re not going to raise rates until 2023,” Saretsky says.

But unlike in the middle of the last decade, when demand from foreign and new Canadian investors had a real impact, especially in B.C., the current investor demand for condos is primarily domestic, Soper says.

It’s not just investors buying condos. In Vancouver, Saretsky says, a significant chunk of demand is coming from Canadians who want to buy condos to live in them.

“We’ve got clients that were looking for single-family houses, and they slowly got priced out,” he says.

Many buyers, he says, are settling for what they consider the next best thing: townhouses and condos.

In Toronto, buyers were back to snapping up condos at a relatively healthy clip as soon as June and July, Pasalis wrote in a recent analysis of the city’s condo market. But between August and October, the city saw a spike in new listings likely driven by investors offloading units in a weak rental market.

Still, inventory levels never strayed too far from what analysts call a “balanced market,” one with homes selling reasonably quickly but without bidding wars, Pasalis wrote.

“We saw a significant movement of investor-owned condominium into the hands of first-time homebuyers in 2020,” Soper says. “But there was still more people selling than buying, so prices softened in places like Toronto and Vancouver.”

The return of domestic investor demand, though, is turning that around, he adds.

Saretsky says condo prices in the Vancouver suburbs are already up five per cent or more compared to this time last year. And even one-bedroom condos in downtown Vancouver — a type of listing real estate agents would almost dread between April and November — are starting to be hot commodities again.

“Every one-bedroom condo in downtown Vancouver under $650,000 has a multiple offers now.”

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