Toronto’s hot condo market eroding affordability ‘on an almost daily basis’

Toronto’s condo market has now been gripped by the same fever that has enveloped the region’s single-family home market throughout the pandemic. Realtors say a shortage of listings and fierce competition among buyers is boosting condominium prices on an almost week-over-week basis.

Andrew Harrild of Condos.ca says available condos are so scarce that buyers are seeing affordability eroded “on an almost daily basis.” In some cases, similar units in the same building are selling for tens of thousands more within a matter of days or weeks, he said.

He says a two-bedroom-plus-den, 39th-floor York Street condo sold on Dec. 12 for its asking price of $888,000. By Dec. 30, the same sized unit on the 43rd floor sold for $940,000, $25,000 over the asking price.

“You might as well buy now because you see prices going up week by week,” said Harrild, adding that it’s common to see at least a dozen bids on scheduled offer nights.

“Anything less than half a dozen offers is a win,” he said.

The Toronto Regional Real Estate Board (TRREB) reports that the last quarter of 2021 was the tightest for resale condos in 20 years. As new listings declined and units that had been sitting on the market got bought up, selling prices in the city of Toronto rose to $760,643 on average at the end of January, up from $730,792 only a month earlier. Across the entire GTA, prices rose $36,627 to an average of $748,566 in the same period.

More listings are coming to market as spring approaches, said Harrild. That might slow price escalation but he doesn’t expect it will bring down the cost of a condo.

So far though the growth in listing numbers isn’t encouraging, said Ara Mamourian, managing partner of Spring Realty, Re/Max Hallmark. In last Tuesday’s weekly listings report for his company’s territory there was a total of 644 units listed for sale, compared to 683 this week. The brokerage concentrates on the area from Victoria Park in the east to the South Kingsway in the west, between the lake and just north of the Bloor-Danforth subway line.

Mamourian said he noticed listings dropping in December but it wasn’t until “we hit a critical low” of fewer than 700 units in that area that “we turned into an aggressive seller’s market across the board.”

With fewer units to choose from, buyers are compromising on features such as flooring, parking and views. It used to be that buyers wouldn’t even look at a unit that faced another building. That’s changed, said Mamourian.

“They want to get into the market any way that they can and stop going through that whole motion of offer nights — getting your bank draft and losing to 29 other people,” he said.

The action isn’t confined to downtown, however, he said. A condo at 555 Wilson Ave. that was listed at $649,000 drew 35 offers and sold for about $900,000 this week.

It’s not impossible the average condo price will hit $1 million this year, said Mamourian, but he thinks it could happen by the first quarter of 2023.

Andrew la Fleur of Re/Max Condos Plus expects prices to rise 30 per cent this year but only if there’s no government intervention that would cool the market.

Condo experts are predicting the government could make it tougher to buy investment units, which could tamp down activity, say agents like la Fleur, who sells predominantly to investors.

For now, he says, the rise in single-family home prices is making downtown condos look like a good buy again. “Townhouses in the burbs are hitting $1.4 million. Meanwhile, you can get a great downtown condo for $900,000, which sounds like a lot of money, but it’s cheap compared to the alternatives,” said la Fleur.

Pre-construction condos are a good measure of where prices are headed, said Shane Little of the Richards Group.

“The new developments in the east end are pricing at about $1,450 to $1,500 per square foot. That shows me we still have some ground to cover before condos in the 416 hit a market-wide average of $1 million,” he said.

Pre-construction condos are also doing roaring business, said Shaun Hildebrand, president of Urbanation, a market research firm that tracks new development and prices.

Eighty-five per cent of the units that launched for presale in 2021 sold by the end of last year. That’s well above the 60 per cent, 10-year average. The number of unsold units dropped 25 per cent year over year, 31 per cent below the 10-year average. In the same period, prices rose 18 per cent.

Hildebrand says about 70 per cent of pre-construction units are sold to investors, most of them mom-and-pop buyers who are looking to recoup their costs with rent while waiting for the unit to appreciate longer term. Helping fuel those sales is the recovery of the rental market, which slumped during the pandemic as tenants left the city core. More flexibility from developers is also encouraging them, he said.

“It used to be that you put down 15 to 20 per cent within a year or less after signing your contract to buy the unit. Now they’re often being stretched over two years, sometimes long and often in smaller installations,” said Hildebrand.

“This helps investors absorb the higher prices but it also takes a bit of skin out of the game in the event that prices experience a near-term downturn,” he said.