Toronto Condo Market Report • October 2021
For successful buyers and sellers, September was an excellent month. There were 9,046 units sold, the 3rd highest for this month, although down 18% from September a year ago. More importantly, sales in September were 5% higher than August which was the first month-over-month sales increase since the peak in March. Since then, we have had five straight months of declining sales - does this spell doom for the market?
Well the real story is the lack of listings - new listings in September were 34% lower than last year, which can only mean that prices will continue to climb.
People Are Not Selling
While the media talks about affordable housing, the short-term question for the industry is not that prices are too high but why are people not selling?
1) Retirement Savings: most people nowadays do not have a guaranteed pension and must save for their own retirement. With interest rates at historic lows, when many people move or upgrade their housing, they are not selling their existing property. Instead they are holding onto the other property and becoming real estate investors - renting it out to build wealth.
2) Moving Costs Are Too High: land transfer taxes alone for a $1M house in Toronto are $33k! And that's if you can even find a house in Toronto under $1M that does not require a $300k renovation down to the studs. Many people are deciding to stay put and are instead renovating their current houses to better fit their needs.
Condos Popularity Roaring Back
Condos, not only in the downtown core, but across all of the GTA have roared back to life.
1) Price Gap: The price gap between condos and low-rise housing has widened significantly, making condos much more price attractive. The gap always needs to narrow and low-rise housing prices are not coming down, so the prices of condos must then rise.
2) Overreaction to Covid-19: People overreacted to the long-term impact of Covid-19 in the downtown market (I told all of my clients to hold onto their properties and ride out the pandemic). I believe that working form home 1 or 2 days a week will become common but moving outside of the 416, and even 905, will not be an option unless your employer is prepared for 100% work from home which will not happen in most jobs and industries.
3) Affordability: The prediction of the death for small condos will prove unfounded. While studios and small 1 bedrooms having taken a beating during Covid, we are already seeing the demand for pied-a-terre condos from buyers who moved out of town but now need a place for 3 or 4 nights a week as they return to some degree of working in the office. Plus, buying a smaller unit is simply the easiest way to lower your purchase price - there will always be demand at the most affordable end of the market.
Condo Market - Comparing Sept 2020 to 2021
Climbing Resale Prices Justify Pre-Construction Prices
Bay tends to be an expensive street for condos due to its proximity to 2 universities and hospital row on University Ave. U Condos, adjacent to U of T, is one of the most expensive buildings. Built 5 year ago, the tower at 1080 is 55 storeys and has 1002 units.
I traced the prices per square foot for identical one-bedroom units at just 512 sf. A corner unit with two balconies but no den, no parking, and even some with no locker. What do I find? Prices have risen by 29% in this building in JUST ONE YEAR! With resale prices at this level, it is understandable that pre-construction prices at $1,400-1,500/sf seem very reasonable and prices at $2,000+ for Yorkville are not outside the market. Lastly, there is simply no inventory in the area - nothing currently for sale - which further suggests that prices will continue to increase in this condo building and area.
Downtown Toronto Rental Market
1,679 units were leased in September in downtown Toronto including the Humber Bay Shores. While this number is slightly lower than previous years, the key takeaway is that by month end there were 1,896 available units to be leased. This number is also down and shows about a one month’s supply which is a tight market. Key takeaway - expect overall rents to continue to trend up.
Continuing the focus on smaller condo units, this market is even tighter than the overall market and prices now in the $4.00/sf per month range.
Comparing Condo Lease Activity By Condo Size
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