Increasing valuations and surging rents had been the hallmarks of the Toronto real estate market, particularly for condominiums, in the years following the 2008-2009 Great Recession. The staggering demand for dense downtown housing, as well as investor speculation and short-term rentals, contributed to one of the hottest housing markets in the world.
Then the COVID-19 public health crisis happened.
Like other major urban centres, the coronavirus pandemic has altered the residential landscape in Toronto, which has become associated with an enormous inventory of tiny and ultra-expensive condominiums. North America’s fourth-largest city is enduring a two-pronged problem. The first is that Airbnb hosts are selling their vacant short-term units, with borders closed to non-essential travel, and short-term rental rules tightened last year. The second is that people are fleeing the hyper-dense city for green pastures in rural communities.
This begs the question: can condo owners sell their units in a market plagued by dwindling demand and surging inventory? Many savvy investors who got in on the ground floor in the last decade will likely turn a profit when they secure a buyer. However, somebody who acquired a one- or two-bedroom suite in the last couple of years may find it harder to make money off the property and use the proceeds to upgrade to a detached or semi-detached house.
Ultimately, some Toronto condo owners may be feeling trapped by a large inventory of condos, most of which had been erected in the last few years. Or, as Dale-Paul Jordan, who listed his Toronto condo, told Reuters: “One of the things we’re handcuffed to is selling our condo to help with the down payment.” But does the data reflect the notion that condo owners in the Toronto real estate market are handcuffed? Let’s explore!
Condo Owners in the Toronto Real Estate Market
Sales activity and prices slowed down in the fall, while condo stocks intensified across the city.
According to the Toronto Regional Real Estate Board (TRREB), average Toronto condo prices tumbled 4.7 per cent year-over-year in December to $625,828, a contrast to the 8.1-per-cent growth in the average detached home price ($1,475,758).
Could this be the new norm, at least temporarily?
Recent TRREB data highlights that condo inventories more than doubled in the Greater Toronto Area. This has been a remarkable turn of events, because the broader real estate sector is booming in Toronto and the surrounding areas.
TRREB’s Chief Market Analyst Jason Mercer noted in the report, “there was a dichotomy between the single-family market segments and the condominium apartment segment. The supply of single-family homes remained constrained resulting in strong competition between buyers and double-digit price increases. In contrast, growth in condo listings far-outstripped growth in sales. Increased choice for condo buyers ultimately led to more bargaining power and a year-over-year dip in average condo selling prices during the last few months of the year.”
For now, it seems as though Toronto condo owners looking to leave the city have two options: stay put or sell the unit at a deep discount. But perhaps 2021 will offer more options for “handcuffed” homebuyers.
A Rebound in the Condo Market in 2021?
It is widely expected that many of the public policy health guidelines will remain intact in the first half of 2021. This includes immigration controls and a crackdown on short-term rentals (Airbnb). But the second half of the year could see heated market activity, with more Canadians immunized with the coronavirus vaccine and consumers holding about $200 billion in savings.
Although there has been some speculation that the Bank of Canada (BoC) could be the first central bank to tighten monetary policy, the institution has yet to send any signals that it would raise interest rates anytime soon. In other words, the BoC’s benchmark lending rate of 0.25 per cent and the five-year mortgage rate of below five per cent are unlikely to change in 2021 and possibly in 2022. Put simply, borrowing has never been cheaper, which is allowing new homebuyers to delve into the real estate market.
Another lingering question impacting the direction of Toronto real estate: if life returns to some semblance of normalcy following widespread vaccinations of Canadians, will corporations maintain their work-from-home policies? Google recently announced that the company would have employees return to the office in September and only experiment with flexible telecommuting a few days per week. This matters because many professionals have been enjoying newfound freedom over the last several months and some have migrated to regions further from their place of employment, soaking up the luxury of no daily commute coupled with quieter rural living.
But this could potentially change toward the end of 2021, with businesses returning to their commercial workspaces. Will this translate to a wave of homebuyers (and condo seekers) returning the big cities? Should this wave start to trickle back to the city sooner rather than later, this along with the other strong demand trends forecasted for the coming year, should provide some relief for handcuffed condo owners in Canada’s largest real estate market.
TORONTO – One expert predicts Ottawa‘s changes to mortgage rules will help spur demand among potential homebuyers but says policies aimed at driving new supply are needed to address the “core issues” facing the market.
The federal government’s changes, set to come into force mid-December, include a higher price cap for insured mortgages to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
CIBC Capital Markets deputy chief economist Benjamin Tal calls it a “significant” move likely to accelerate the recovery of the housing market, a process already underway as interest rates have begun to fall.
However, he says in a note that policymakers should aim to “prevent that from becoming too much of a good thing” through policies geared toward the supply side.
Tal says the main issue is the lack of supply available to respond to Canada’s rapidly increasing population, particularly in major cities.
This report by The Canadian Press was first published Sept. 17,2024.
OTTAWA – The Canadian Real Estate Association says the number of homes sold in August fell compared with a year ago as the market remained largely stuck in a holding pattern despite borrowing costs beginning to come down.
The association says the number of homes sold in August fell 2.1 per cent compared with the same month last year.
On a seasonally adjusted month-over-month basis, national home sales edged up 1.3 per cent from July.
CREA senior economist Shaun Cathcart says that with forecasts of lower interest rates throughout the rest of this year and into 2025, “it makes sense that prospective buyers might continue to hold off for improved affordability, especially since prices are still well behaved in most of the country.”
The national average sale price for August amounted to $649,100, a 0.1 per cent increase compared with a year earlier.
The number of newly listed properties was up 1.1 per cent month-over-month.
This report by The Canadian Press was first published Sept. 16, 2024.
MONTREAL – Two Quebec real estate brokers are facing fines and years-long suspensions for submitting bogus offers on homes to drive up prices during the COVID-19 pandemic.
Christine Girouard has been suspended for 14 years and her business partner, Jonathan Dauphinais-Fortin, has been suspended for nine years after Quebec’s authority of real estate brokerage found they used fake bids to get buyers to raise their offers.
Girouard is a well-known broker who previously starred on a Quebec reality show that follows top real estate agents in the province.
She is facing a fine of $50,000, while Dauphinais-Fortin has been fined $10,000.
The two brokers were suspended in May 2023 after La Presse published an article about their practices.
One buyer ended up paying $40,000 more than his initial offer in 2022 after Girouard and Dauphinais-Fortin concocted a second bid on the house he wanted to buy.
This report by The Canadian Press was first published Sept. 11, 2024.
