My gut always says that $500,000 isn't a realistic budget to get into the TO condo market anymore. But am I wrong?
I have a love-hate relationship with social media. I think it's a great way to keep in touch with clients without being in their face. But it also means that every agent out there ends up posting the same generic monthly Toronto sales stats without going into a deeper dive about the context of the numbers. People like flashy charts and numbers but the context is so important. And, unfortunately, we live in a world where most people won't bother to read past a headline and so these headlines actually have a powerful effect on buyer and seller sentiment.
I was scrolling through my Facebook page this morning and I remembered doing an analysis back in Jan 2017 showing exactly how many 1-bedroom units in the core were actually available for under $365k. There were none. That was the start of an insane seller's market the likes of which most people had never seen before.
Then, in Feb 2018 I did the same analysis but instead increased the price max to $450k. There were 10 units available. The purpose was to show that the entry point for Toronto condos has been steadily rising and I find more people respond to real numbers they can relate to, rather than just the usual year-over-year stats charts that are typically thrown around. I also did it to contradict the numerous media reports around those times stating that condo supply was increasing and pricing had peaked. They were dead wrong. Both times.
In fact, I wrote a full blog post about this at the end of 2017 where it quickly became apparent that anything half-decent in TO listed for $499k would end up in a bidding war. If you're curious, you can check in out here:
Which got me thinking. Is it even possible to find a condo in the core for $500k anymore?
The real impetus for this post came earlier this year when I had two different buyer clients who put a self-imposed price cap on their condo searches at $500k. This was not a bank-imposed maximum or anything to do with affordability - they just "felt" that for $500,000, they should be able to find the perfect condo walking distance to work and since that was a lot of money, their options would be plentiful.
Fast forward three months and neither of them have bought and quite honestly, I don't think they ever will.
It's one thing to say "Toronto is expensive". I mean, it is. But it's another to say "I think I should get the best condo I can find for X dollars because I think that's a lot of money". That's not how markets work and in order to be successful in any market as a buyer, you have to be flexible and appreciate what "market value" really is. It's not what you are willing to pay; It's what someone else is willing to pay that determines whether or not you'll be successful as a buyer.
A few years ago I would tell buyers that $350k was the entry point for Toronto condos. That quickly escalated to $375k, to $425k, and now if a buyer has a budget of $500k and they absolutely must be in the core of Toronto, we're going to start the search by looking at studios. That's the way my conversations with buyers start and I'm able to gauge pretty quickly if their $500k budget is actually a true financial constraint that we'll have to work with, or if it's a self-imposed maximum for one reason or another.
Since it's the week of Easter, which is a very slow week for new listings, and we have three solid months of 2019 condo sales behind us, I thought it would be a good idea to take a step and back see what $500k actually got people in the TO condo market and to see if my budget discussions with buyers were on point.
For argument's sake, I'm going to define the "core" as anything from Yorkville, down to the lake, east to the DVP and west to Bathurst.
So let's get right into it.
- From Jan 1st, 2019 to when I'm writing this (April 15th, 2019) there were a total of 787 studio or 1-bedroom condo sales within those boundaries.
- 133 of those sold at or below $500,000, which makes up roughly 16.9% of all studio and 1-bed units sold so far this year within the "core".
- Of those 133 units, 49 were studios and 84 were actual 1-bedroom units (36.8% studios, 63.2% 1-bedrooms)
- Of those 84 one-bedroom units, 37 were under 500 sq ft.
- And of the 133 units sold, 17 actually included a parking spot. That number was higher than I expected to be honest.
So when you think about it, there was roughly 1 unit sold per day in the core, for $500k or under since Jan 1, 2019.
Now you can make numbers say anything you want and you could actually argue "Adil, that's a lot! I'm sure your buyers could have found one." But this is how my conversations with those buyers actually went:
"Do you want to live at Lakeshore and Bathurst? No? Too far? Ok let's eliminate 6 of those units. How about CityPlace? No? Ok there goes another 3. How about at Dundas and Jarvis? No? Ok there goes another 3. Oh, you want an actual bedroom and can't live in less than 500 sq ft?"
And so on.
So yes, if you didn't care where you lived in the core and didn't care about the size of your unit, or having an actual bedroom, or the view, or the actual building you were investing in, sure - maybe there was (and still is) a shot to find something in Toronto for under $500k.
But as soon as you add in any sort of restricting criteria, like neighbourhood, view, the building, or even something as simple as wanting an actual bedroom and a living room that fits a sofa, you'll see how the options get really limited, really quickly. And maybe then $500k won't look like such a big budget after all.
So is $500,000 a realistic budget for the Toronto condo market? I'll let you decide.
If you have a comment, feel free to leave it below. And remember, if you haven't already, please "like" my Facebook page, follow me on Instagram and check back regularly!
Your Toronto condo lover,
iPro Realty Ltd, Brokerage
Direct: 647-223-1679 (call/text)