Real estate investors cautious amid a generally ‘horrible’ condo market
Toronto’s condo market is stirring slightly after a long period of dormancy.
In the resale condo segment, a combination of interest rate decreases and depressed prices is drawing more interest from buyers, but industry players caution that weighty inventory will prevent sales and prices from taking off.
“It’s a start,” says Christopher Bibby, broker with Re/Max Hallmark Bibby Group Realty. “We know it’s not a robust market, but it’s an improving market.”
In recent weeks, Mr. Bibby has sold units which had languished in the past; in some cases he needed to relist the property multiple times each time the listing expired.
“Cumulative rate cuts have obviously made a difference,” says Mr. Bibby of the Bank of Canada’s benchmark lending rate.
The activity picked up across a range of prices, he says, with sales ranging from the $600,000 level to smaller two-bedrooms around $800,000, and one that sold in mid-town above the $2-million mark.
The three-bedroom unit at 111 St. Clair West, the Imperial Plaza, was listed with an asking price of $2.195-million and sold for $2.127-million after 50 days on market.
Mr. Bibby says there’s a perception among market watchers that the condo segment is “horrible”, but there are many different niches within the overall market.
Pre-construction sales remain moribund, he adds. “The interest levels aren’t there.”
In the resale market, condo sales in the central 416 area code jumped 38 per cent in November from the same month last year, according to the Toronto Regional Real Estate Board. That performance still lags the 49 per cent year-over-year leap in the detached bracket, and the 51 per cent leap in townhouses, but it pulled ahead of the 24 per cent rise in sales of semi-detached homes in the same period.
Comparisons with November of last year also need to factor in that the Greater Toronto Area real estate market in the fall of 2023 was near death as consumers grappled with high interest rates, inflation and fear for the economy.
The average price of a condo apartment in the City of Toronto dipped slightly in November to $713,364 from $720,280 in the same month last year.
The average “days on market” meanwhile increased to 36 from 28 in the same period.
The high level of inventory gives buyers more negotiating power, according to TRREB.
National Bank of Canada economist Daren King estimates that seasonally-adjusted sales in the GTA condo segment remained fairly stable in November, with a 0.3 per cent dip from the previous month. That follows a 19.3 per cent gain in October from September.
On the supply side, active listings rose 2.8 per cent in November from October.
As a result, market conditions loosened slightly during the month and remained considerably looser than the historical average, he says in a note to clients.
Andre Kutyan, broker with Harvey Kalles Real Estate, recently sold a condo unit at 311 Bay St., the St. Regis Toronto.
The residence, which is part of a luxury hotel complex, has relatively high maintenance fees – even compared with other five-star residential buildings such as the Four Seasons, Shangri-La and Ritz-Carlton, he says.
Mr. Kutyan listed the 1,445-square-foot suite with an asking price of $1.595-million, but it had previously been listed with another agent at the peak of the market in March, 2022 with an asking price of $2.268-million.
Mr. Kutyan says the segment is saturated with inventory.
Mr. Kutyan sold suite 4602 to his own client for $1.5-million, which is the same amount the seller paid when they purchased it from the developer in 2017.
“As a seller, it’s very difficult to swallow,” he says of the downturn in the condo market. To get the deal done, they sold it turnkey, right down to the kitchen implements in the drawers.
That appealed to the buyer, who will use it as a pied-a-terre in the city, Mr. Kutyan says.
Meanwhile, buyers have disappeared in the price range between $1-million and $1.5-million since the federal government announced new mortgage rules set to kick in on Dec. 15th.
Mr. Kutyan figures condo hunters in that bracket may be waiting for the changes, which will loosen up the lending rules for buyers who need a mortgage.
While buyers are circulating, they remain hesitant, Mr. Bibby says, and most sellers need to be patient and willing to negotiate. Many still can’t grasp that the market pace has changed from the frenzy of previous years.
“Their view is, we have to sell this in a week or two and that’s just not going to happen,” he says.
Mr. Bibby says agents need to give sellers the most precise information about market dynamics available so that the seller can decide on a realistic asking price. In some cases they interview multiple agents and become stymied when they receive conflicting advice.
“Sometimes they make mistakes,” he says. “There are still some people that are chasing a market that’s long gone. If their expectations are out of line, maybe it’s not the right time for them.”
Many condo owners who have failed to land a deal are frustrated, he adds, and the uncertainty takes a toll on their well-being.
“There are a lot of people now that are stressed in the market. They just don’t know what to do. Do I wait? Am I priced too low? Am I priced too high?”
Pinpointing the right asking price is a challenge, he says, but even well-priced units may sit for a time.
“The pricing isn’t the problem – it’s the sense of urgency. People are timid and cautious.”
Looking ahead, Mr. Bibby says a lot of people he talks with – particularly potential sellers – are very optimistic for the spring of 2025.
“If everyone waits for spring, the supply levels could come back up – and that’s a long time away,” he says of the potential for change between now and then.
Mr. Bibby believes typical seasonal trends are “out the window” as buyers and sellers pay more attention to interest rates and economic forces.
He points out that the real estate market showed more vigour in January, February and March than it had in the traditional fall market of 2023.
He believes the recent buyer awakening may bring more sales.
“I don’t think the year’s over yet.”
This article was first reported by The Globe and Mail
