Market tightens for Toronto condos

Written by Carolyn Ireland | Published in The Globe And Mail
In the Press
April 5, 2023

As consumers gain some confidence in Toronto’s real estate market, condo units are selling at a faster clip this spring. Many buyers seem motivated to strike a deal before rivals appear.

In high-rise towers and boutique buildings from mid-town south to Lake Ontario, listings are lower than normal, says Christopher Bibby, broker with Re/Max Hallmark Bibby Group Realty.

One day last week, Mr. Bibby had 17 condo listings pop up in the city core – and some of those had been relisted after failing to sell earlier.

That is a trickle compared to last year at this time when 120 or so fresh listings would arrive on a typical day, he says.

Mr. Bibby says the condo segment remains much calmer than the market for single-family homes, where coveted properties may receive 15 or 20 offers.

“The problem is, people see multiple offers and they say, ‘that’s what we want.’”

He advises against pricing a condo with an eye-catching asking price and an offer date in the hopes of sparking a bidding war.

The strategy may work for some of the most coveted single-family homes, he says, but in the condo market, he has received multiple offers on only one property this year.

In that case, the two-bedroom unit in the King West area was listed with an asking price around the $900,000 mark and no deadline for submitting offers.

Competition happened organically when three buyers came to the table and still the unit sold for a relatively small premium of $1,100 above asking.

But the bidding skirmishes for semi-detached and detached houses have some buyers turning back to condos, Mr. Bibby says.

“Not everyone has the same comfort level to be in those competitive scenarios.”

At 130 Rusholme Rd., the boutique building known as the IT Lofts had not had a unit for sale in about one year. Mr. Bibby listed a two-bedroom unit with an asking price of $975,000 and expected it might take time to sell.

“We went out at what we felt was a very reasonable price. By day two we had a full price offer,” he says. “That was a very different experience than what we were prepared for.”

Still, Mr. Bibby sees a notable difference in the mindset of buyers. Many who were firmly stuck on the sidelines are willing to make a move now that prices and interest rates are stabilizing.

“I’m starting to see that confidence now,” he says. “There’s a little bit of a buzz that there wasn’t in the fall.”

Mr. Bibby recently worked with one client who had sold a large house a couple of years earlier. With a budget in the $4-million to $6-million range, she remained watchful during the uncertainty in the fall.

Recently a condo at 385 Brunswick Ave., converted from the former Loretto Abbey, was listed with an asking price just below $5-million.

Mr. Bibby’s client was one of the first people through. She quickly had an offer accepted at the full asking price.

Ksenia Bushmeneva, economist at Toronto-Dominion Bank, notes that so far the economic environment has not dampened Canadians’ willingness to spend.

TD’s latest debit and credit card spending data shows that consumers kept their purse strings open in February, Ms. Bushmeneva says.

Following a sizeable jump in December and January, spending continued to rise in February – though at a more moderate pace, she adds.

Ongoing resilience in the labour market, combined with TD’s spending data, has led the bank to upgrade its outlook for consumer spending in the first half of this year.

She expects consumer spending growth to slow as the year unfolds as past interest rate hikes continue to bite.

Mr. Bibby says that, so far, the buoyant mood of buyers has not drawn many sellers.

Mr. Bibby says some owners who postponed or cancelled their listings last fall are glad to hear the frozen market has thawed and sales are taking place – but they still want to wait for prices to rebound.

He cautions, however, that prospective sellers should not hold out for a return to the mania of late 2021 and early 2022.

“To expect that is not realistic,” he says of the frenzy. “We won’t go back to that type of market again.”

Much of the run-up during the pandemic was driven by low interest rates. At the low, the Bank of Canada’s policy rate stood at 0.25 per cent. After a series of hikes aimed at tamping down inflation, the central bank’s benchmark rate now sits at 4.5 per cent.

As a result, the exuberance of recent years has been stifled.

Robert Hogue, assistant chief economist at Royal Bank of Canada, says housing affordability is poised to improve in Canada in 2023, but for now, buyers continue to face a very challenging environment.

Rising interest rates further inflated home ownership costs in the fourth quarter of 2022 despite a dip in property values, he says.

The pace of deterioration in affordability is slowing significantly, Mr. Hogue adds, as lower prices begin to lessen some of the pressure.

The combination of stable rates and further price declines should help to lower ownership costs, the economist adds.

“The considerably harsher buying conditions have depressed home resale activity and sent prices on a downward trajectory,” he says in a research report.

So far the drop in prices has been insufficient to offset the toll caused by higher rates, he explains, but with the central bank likely done with its rate hike campaign, Mr. Hogue expects any further price decreases to make a more tangible difference for buyers.

Looking ahead, Mr. Bibby sees no indications that a flood of new listings will arrive this spring.

He has heard from some downsizers returning from their winter vacations who are preparing to list large houses in stalwart neighbourhoods such as Moore Park, Rosedale and the Annex.

During the downturn of 2022, many owners of four and five-bedroom homes saw no reason to make the transition while the market was in the doldrums.

But many will purchase a new home before they sell their existing property. Some are looking at the decline in prices outside the city and starting to look beyond Toronto. Others are looking for large condos in the luxury segment.

“I think they’re going to buy before they sell,” he says. “Where they’re going next and the lifestyle is very important,” he says.

Mr. Bibby says owners of condos or houses who are considering selling need to time their decision based on their own circumstances.

But he reminds clients that those who delay listing do run the risk that competition may subside again – especially if a significant amount of inventory streams on.

He points to January, 2022, when tales abounded of properties drawing more than 50 bids, only to have sales dramatically cool by that spring after the Bank of Canada began raising rates.

Similarly, the market was moving at a blistering pace in early 2017 but government measures introduced in April of that year brought about a sudden slump.

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