"How's the market?" is always a loaded question. The answer is usually pretty complicated, especially now.
I can't remember the last time I went to Canada's Wonderland. I used to love it there. I mean, you could spend a whole day chilling with your friends, going on coaster after coaster and when you think about it, it was actually pretty cheap. Their pricing was brilliant - a one day pass back in the day was somewhere around $25 but if you bought a season pass, it was like 40 bucks. So it was a no-brainer that all my friends and I had season passes. Prices have obviously gone up since but their one-day-pass-to-season-pass ratio is still pretty similar. I guess they bank on the fact that most people would only ever go maybe once or twice per season. Or maybe they didn't care because when you were there, you'd spend a ton on food, parking, and those carnival games that were next to impossible to win.
I don't know if my body could handle a roller coaster anymore...and I really don't want to find out. These days the only ups and downs I'm used to experiencing are the daily swings in the S&P 500 and the seemingly nonsensical valuations in the stock market. So it would be only natural that everyone's attention would turn to real estate to see what kind of ride we're in for there.
Lately whenever I get asked "how's the real estate market", I wait to see how long the person that's asking has to chat, because it's not a simple answer. It never is but right now, it's certainly a longer conversation.
I'll admit I've rewritten this blog about 6 times already, because each time I'd get caught in my own analysis, wrapped up in numbers that I thought were right but then I'd prove myself wrong, and overall just started to confuse myself. That should give you an indication of how confusing the market is right now.
In early 2020, the Toronto real estate market got a shot of steroids in the arm. Not just condos, but prices for any type of real estate shot up like a rocket almost at the stroke of midnight on Jan 1st, 2020. And honestly, I couldn't explain why. Interest rates hadn't changed, there were no new qualification policies coming into effect. The market just took off. I had clients and friends calling me weekly in January and February 2020 asking "What is going on? How is this happening? How long will this last?" And my response was always the same - "This makes no sense". It really didn't. And a big part of me really wonders what would have happened to prices had this pandemic not forced a pause to the craziness.
So how is the market?
Let's talk freeholds first.
If you were looking for a 3-bed/2-bath in Leslieville or Riverdale thinking you'll get a great deal since we're in the middle of a pandemic, you'll be in for a very big disappointment. There may have been a window of opportunity for some buyers back in April and maybe into May, but demand and confidence has been increasing steadily (and quickly) week over week and you can definitely feel it. The market shifted from under-pricing for multiple offers in Jan/Feb/early March, to pricing "fairly" with offers any time in April and into May, and now we're firmly back to under-pricing with expectations of multiple offers again. There are offer dates on just about anything in the coveted $1 million to $1.5 million range because the buyers clearly there and ready to act.
In fact, if you were looking for a $2 million detached home within the city right now (think Leaside, Lawrence Park, Summerhill, The Beach, etc) you'll probably be up against multiple buyers even at that price point. I joked with clients the other day that the $2 million freehold market is actually hotter than the $700k condo market. Can someone explain that to me?
So what's going on with condos?
In short, it's hit or miss out there for condos. And that's the way I've been describing things for several weeks now. We all know sales volume is way down for all property types but the "feeling" on the street has been that things are consistently getting better, and I think the industry has resolved that April was certainly the low-point for the market (condos and freeholds) since the pandemic started. I was honestly never really too concerned with freeholds because there's only so many actual houses that exist in Toronto. But my fear has always been that condo sellers who didn't want to sell during the height of fear in late March to early April were just waiting for things to recover a bit before putting their units up for sale. Well, things have been getting better week-over-week for a couple months now (showings have been rising consistently, offer registrations are up, sales are up). But this little voice inside me has been asking "when things start getting better and sellers see some strength in the market, will condo owners sell into that strength?"
I think we're seeing some of that right now.
I've seen more condo listing pop up in the past couple weeks than I have in a while. And I'm just not seeing the sales volume needed to absorb those listings. Maybe I'm just watching things too closely or maybe I'm just aggregating more data than I typically do. But it's a very different story than what I'm seeing in the freehold market. Demand for freeholds is clearly there. For condos, it's still hit or miss. My last downtown condo listing sold in 24 hours and I had 5 showings booked immediately, but my latest midtown condo listing has had only 1 showing so far. Like I said, hit or miss.
Let's be real though - if you have a 1-bed condo in King West that's worth close to $600k and you list for $499k with an offer date, you will still get 30+ people in the door and end up with multiple offers and sell over asking, probably very close to what you'd expect your place to be worth. The low-end of the market will always attract buyers under any circumstances and, well, $500k is as entry-level as it gets in the core. Same with unique spaces, lofts, and those rare units that hardly ever come up for sale.
But what if you listed your $600k King West condo for $629k, with offers any time? Will you see the same interest? I don't know if you will. Surely a whole bunch of those buyers who will jump to make offers if you list it for $499k will probably think they can actually get it for $499k, driving up the number of offers and push the "real" buyers to make stronger bids. Hate the game if you want, but it is what it is.
So why aren't buyers jumping on condos like they are freeholds? Kinda feels like condo buyers don't have the same sense of urgency right now.
Maybe it's that the rental market is so bad right now that most investors have all stepped to the sidelines. I mean, if you were looking for an investment unit and I told you that rents are down close to 10% from last year and that there are literally hundreds of 1-bed units on the market right now, AND that the Landlord Tenant Board is closed so that nobody can actually get evicted for not paying their rent, would that make you comfortable buying an investment unit? And while investors are not the only buyers around, they certainly make up a significant enough percentage of condo buyers that when they pull back, the market feels it.
Or maybe it's that most active buyers are first trying to see if the freehold market has "fallen" enough to make their dream of owning a 3-bed/2-bath semi in Leslieville for under $1 million finally possible. Spoiler alert - it's not. Maybe these buyers will eventually come back around to the condo market once they realize demand for freeholds is as strong as ever and the reality is there are no "deals" to be had, and that houses in Toronto are still as (or more) expensive than they've ever been.
Or maybe when the price differential between freeholds and condos starts to widen (as it is now), people will either see value in condos again, or be forced to condos simply due to how much they can afford.
Or maybe there really are that many people tired of being stuck in a 600 sq ft condo all day with their spouse while both try to work from home, and everyone at the same time is thinking it's time for an actual house.
Whatever the reason, it's safe to say that we're in a market with two very distinct playing fields. Freehold sellers enjoying the resurgence of a delayed Spring market, while condo sellers sitting patiently for their time in the sun, with the occasional condo bidding war turning up here and there on special or clearly under-priced properties. The good news for condo sellers is that when it looks like there's a deal to be had, buyers are stepping up quickly. And don't get me wrong, condo sales are happening every day - there are definitely buyers out there. But it just feels a bit like a game of chicken because condo buyers have choice and are being patient, and sellers don't feel desperate to sell.
You know I'll be watching this play out over the next few months like a hawk.
Have you checked out my previous blog posts?
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Your Toronto condo lover,
iPro Realty Ltd, Brokerage
Direct: 647-223-1679 (call/text)