Toronto's Condo Market Shows Signs of Life

As Toronto's condo sector begins to show a bit of resilience this fall, savvy buyers are returning to the real estate battlefield. However, a cloud of uncertainty still looms over the market, characterized by high inventory levels and a tentative buyer sentiment.

Recent trends reveal that downsizers, first-time buyers with familial financial support, and ambitious young professionals are the main players capitalizing on the declining prices. Christopher Bibby, a seasoned broker with Re/Max Hallmark Bibby Group Realty, mentions he sold seven condos in just the first two weeks of September. "In some cases, we’re witnessing a return to 2018 pricing," he reveals.

A Shifting Landscape

The summer saw a rocky performance for condo sales in the Greater Toronto Area, with August recording an 11.4% drop from July. Interestingly, this follows an 18.5% rebound in July, hinting at an unstable market climate. Year-over-year comparisons indicate a 3.4% dip in sales in Toronto’s 416 area code for August, while the average price slipped by 2% to $667,660, according to the Toronto Regional Real Estate Board.

The suburban 905 area wasn’t spared either; sales fell 7.7% year-over-year, with average prices also down by 10.6%.

Buyers in Control

With prices having fallen significantly, sellers must now be realistic about their asking prices. "There’s really no pushback there," says Bibby. Yet many buyers are entering the market with offers that can be jaw-droppingly lower than what sellers had hoped.

The negotiation process has become a lengthy tug-of-war. Bibby adds, "The first offers are always a shock," emphasizing that deals can often collapse, only to be revived later.

A Cautious Approach

Today’s buyers are more diligent, often making their offers contingent upon a satisfactory home inspection. They’re also reviewing condo corporations' status certificates—critical documents revealing financial health and any looming issues. Bibby notes that this cautiousness can sometimes stem from a genuine concern about making the right investment or from simply seeking leverage for negotiating a price cut.

Sellers Feeling the Pressure

On the flip side, some sellers, particularly those who treated their condos as investment properties, are feeling discouraged by stagnant prices and are opting to sell. As a result, an influx of retirees listing their properties aims to avoid Toronto's 3% vacant home tax, which affects units unoccupied for six months.

Buyers Wait and Watch

With many prospective buyers currently on the sidelines, they are monitoring interest rates closely, particularly in light of the recent Bank of Canada meeting. Real estate agent Anna Wong remarks, "A lot of buyers prefer a wait-and-see approach, especially as they have their down payments ready. They want to gauge the market's direction before jumping in."

Rental Market Surges as Buyers Hesitate

Interestingly, this cautious mentality among buyers has caused a surge in rental activity, with new leases in Toronto's core jumping by 21% from July to August. As newly constructed units come online, renters are benefiting from increased selection and negotiating power. Wong highlights a notable example: a one-bedroom unit in St. Lawrence Market, listed at $548,000, has seen tepid interest despite its prime location.

Strategic Moves in the Market

While sellers are mostly holding firm on prices, Wong likens adjusting asking prices to a strategic game of chess. Some sellers wisely anticipate market shifts and adjust their strategies, recognizing that timing is critical.

In the realm of freehold properties, aggressive listing strategies can backfire, as demonstrated by a two-bedroom bungalow that attracted five offers yet ended up selling for $672,000, higher than its low initial asking price of $599,000. Wong's clients opted out due to budget constraints, lucking out as the final buyer scooped up a well-priced asset.