Nearly a month and a half into the new year, there’s a growing sense that the most challenging period for Toronto’s beleaguered downtown condo market is now in the rearview mirror.
After months of soaring listings, sluggish sales and increasingly sharp price declines, the downtown condo market appeared to turn a corner in December during what’s typically a slow period for housing market activity across the board.
December condo sales in the City of Toronto shot up 76 percent over the previous year. To prove it was no fluke, sales soared 85.5 percent in January, according to the latest Toronto Regional Real Estate Board (TRREB) data released earlier this week.
And it gets better. Two of the most condo-dense areas of the city — called C01 and C08 by TRREB — recorded even larger sales increases. C01, which includes Cityplace, Liberty Village and a large swath of the Financial District west of Yonge Street, posted a 123 percent annual increase in condo sales in January. Condo sales in C08, which includes the Distillery District, the eastern Waterfront Communities, Regent Park and the downtown core east of Yonge Street, more than doubled compared to January 2020.
It’s worth noting that these two areas saw similarly robust sales growth in December too.
Realosophy Realty President John Pasalis said that his team noticed “a sudden surge in interest from condo investors” last November. In a recently published January market report, Pasalis wrote that the investors were “eager to capitalize on the recent price declines in downtown condos.”
“This surge in investor demand is interesting given that the rental market remains sluggish and rents remain down,” he wrote. “But investors tend to be an optimistic bunch and they believe that the rental market, and rents, will be back to normal in no time and that condo prices will also rebound in 2021, so they are motivated to buy for less now while they can.”
For now, Toronto condo prices continue to fall. According to TRREB data, the city recorded an eight percent condo price decline in January as the average sale price dropped to $624,886. Both the C01 and C08 areas recorded condo price declines of over 13 percent in January.
Looking ahead, TRREB is forecasting a deceleration for the rate at which new condo listings are hitting the market by the second half of the year. With sales activity expected to remain strong, there may be room for condo prices to recover some lost ground.
Pasalis believes that the 2021 outlook for Toronto’s condo market depends largely on how the rental market fares in the coming months. If it remains stable from a listings and pricing perspective, then investor demand will continue.
“But if the rental market continues to soften, I suspect this may push investors back to the sidelines,” he wrote, noting that it would take a high level of confidence to invest in a Toronto condo at a 2019 price when rents have hit levels unseen since 2013 and continue to drop.
