Despite the crash in Toronto condo sales, asking prices remain high

Condominium sales in downtown Toronto have tanked, but prices have barely budged thanks to over-leveraged sellers refusing to take a financial hit by listing their units for tens of thousands of dollars below what they bought it for.

 

In June condo sales fell a whopping 29 per cent year-over-year, but prices only declined by 0.9 per cent, according to data from the Toronto Regional Real Estate Board (TRREB). This has led to more inventory on the market with new listings up more than 12 per cent year-over-year giving buyers a bounty of options to choose from.

 

Nearly half of the condos in the market have been listed for 30 days or more — an increase from the typical 18 days — indicating that sellers aren’t meeting buyers’ expectations, experts say.

 

“If you haven’t sold in the first 35 to 40 days, the market is telling you they don’t agree with where you’ve priced your property,” said Tom Storey, sales representative with Royal LePage Signature Realty. “You then need to decide if you take it off the market or relist with a more reasonable price; only then will we see downward pressure on prices.”

 

Sellers would rather cancel listings

“You have sellers who are not participating in the (price) adjustment that’s required, pegging their prices too high,” said Tim Syrianos, principal broker and owner of Re/Max Ultimate Realty. “And then indecisive buyers who have no real urgency to pull the trigger on making a decision.”

 

Sellers don’t want to off-load their unit at a loss, Syrianos said, and for many they can’t take the financial hit leading to “a lot of cancellations” of units, who will relist when market activity ramps up again.

 

Many sellers decide to relist their property at a later date to make a profit off the sale, banking that more buyers will jump into the market in the fall, said Storey, but the unit will maybe only make a profit for the seller some time next year when interest rates are lower and inventory is less.

 

“The only way condo prices go up is if inventory in the market is cut in half,” he added, “and the Bank of Canada is more aggressive in its rate cut cycle.”

 

Pandemic buyers won’t sell for a loss

Buyers who bought in the pandemic price peak between 2020 and 2022 have now seen the value of their unit drop. Since the February 2022 price peak, Toronto condo prices fallen by around $60,000, and sellers aren’t willing to drop prices by that much, said Jarrod Armstrong, a sales representative at Armstrong Team.

 

Many buyers during this period were also investors looking to cash in on the market. Currently, 45.5 per cent of condo units for sale are vacant and 21.7 per cent are tenanted with 31.1 per cent owner occupied, said Storey. It can indicate the majority of units for sale are most likely investor owned.

 

“Tenanted condos are very difficult to sell right now unless priced excessively low,” said Storey. “And the buyer for that must be an end-user to ask the tenant to leave the unit.” That poses another hurdle, as many end-users for condos are typically first-time homebuyers who are being priced out of the market due to high interest rates and the stress test, making them qualify in the seven per cent range.

 

“It will take multiple decreases from the Bank of Canada to make a difference for first-time buyers who are being stress tested at such a high rate,” Armstrong added.

Downtown isn’t appealing

A vicious feedback loop is taking place with downtown’s condo market, which is home to mostly small units that are largely investor owned. However, fewer investors are in the market buying these small units to rent out, and there aren’t many end-users interested in pricey bachelor or one-bedroom units.

 

“Very few of these small units are selling, and many of the buyers can’t drop prices,” Armstrong said.

 

On top of that, downtown’s allure is fading as people work remotely.

 

“Right now, it’s downtown that’s really problematic,” said Armstrong. “You have 20 per cent vacancy rate in commercial real estate and office space. There’s a large reduction of interest in people wanting to live downtown.”

 

 

 

This article was first reported by The Star