LACKIE: Keep an eye on condo prices in coming months

It’s a safe bet any ‘deals’ we’re seeing in the condo market today will be short lived

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For all the talk of Toronto’s bananas pandemic real estate market, one might simply assume this wild market has been uniformly on the rise since the early days of the post-lockdown reawakening.

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With the average price of all property types in the GTA now nearly 20% higher than last year, that year-over-year increase is simply the average. Detached homes, for instance, are actually up 28% from this time last year, while townhouses have risen 45%.

By and large, those increases have been in-step with one another, the market pretty consistently gaining speed and momentum since spring 2020 with a few minor blips along the way.

The condo market, up 30%, has been a different ride entirely, comprised instead of peaks and valleys, valleys and peaks. And as once-unaffordable Toronto is now almost prohibitively so, condominiums are what we should be watching in the weeks and months to come.

When the pandemic first hit and real estate everywhere took a dive, there were endless opinions on what would come next. The doomsday predictors who have been waiting with bated breath for the great bubble burst were certain the time had come.

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Was the market headed for a perpetual freefall? Would downtown be dead forever? Was this it?

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When even single-family homes were languishing in the early days of lockdown, it was almost unfathomable to me that condos could come out of this unscathed. Surely the pandemic would trigger a revaluation of the way we live and density was going to be undesirable. How could people not balk at shared elevators, communal amenities, and compact floorplans after abruptly moving to an indefinite work-from-home model?

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Predictably, sales stalled. But as in the freehold market, things picked back up again by that summer.

I remember being floored when a condo a client wanted had 14 other offers, while another we were sure was priced ambitiously had a dozen offers and sold for $150,000 over list.

What was happening, I wondered.

By fall 2020, however, things took a new turn. Coinciding, perhaps only coincidentally, with the arrival of the much-anticipated “mortgage cliff” and the end of the mortgage deferral programs, the market was flooded with condo inventory. Almost overnight the market changed again. Suddenly things were sitting.

I had two listings at the time and the change was visceral. Showings dropped off, the offers that did come in were aggressive lowballs, the buyer pool almost equally split between reluctant tire-kickers trying to time the bottom of the market and investors looking to take advantage of pandemic distress sales.

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At the time it seemed to many of us with strong opinions on such things that we were bearing the fruit of Toronto’s largely speculative condo market, one that had previously been hard to quantify. We knew that dabbling in preconstruction investment was a portion of the market, but seeing how quickly owners were dumping their units, unable to carry them without Airbnb, was telling.

These were clearly novice dabbler investors who were panicking at the first sign of trouble, not the same constituency as the deep-pocketed investors snapping up the fire sales.

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Again, however, this moment was short-lived.

By winter, agents were anecdotally reporting that they were seeing some heat come back to the condo market. And while our theories about a global pandemic shifting people away from living in close quarters may have been partially true, more impactful was the fact that the pandemic real estate surge had driven prices pretty much everywhere else past the point of affordable.

Even if you wanted to buy something bigger outside of the city, it no longer felt affordable — the Toronto fire had spread.

So here we now find ourselves. A real estate market so prohibitively expensive that condominiums are the last access point for the vast majority of those starting out. That is precisely why we’ve witnessed such a strong Q3.

But if what happened in the freehold market is any indication, inventory will absorb and will be what slows things down and drives the prices up.

It’s a safe bet any “deals” we’re seeing in the condo market today will be short lived.

@brynnlackie

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