Toronto Condo Market Report Jan-Feb 2021
SALES COMMENTARY
The year started off much like how 2020 ended: with sales and prices rising to record levels. Even condos and in particular Downtown condos, joined the market upswing. January sales at 6,900 units were 52% higher than last January. Average prices were up by 15% over January of last year too!
So, let us address why real estate has been so strong during the COVID-19 pandemic. First, people are stuck at home with many working from home. The choice for most is to renovate their existing property or move to a larger one. This explains the move from the City to the ‘burbs and beyond. Secondly, the Government has flooded the economy with cash and pushed interest rates to record lows. With no travel plans, no entertainment, and no need to buy clothes; the cash is going some where, and it is into ‘hard assets’ like real estate and the stock market (also at record highs). While we have not had inflation at the consumer level, we are experiencing inflation in hard assets. When will it end? Our guess is that we will need a severe shock to the system. Remember April of 2017 when the provincial Government introduced extreme restrictions on real estate? The market did not recover for a year. In the past, everyone blamed foreign buyers for the heightened sales activity and rising prices. For 2020, these buyers were minimal. Wait until they return later in 2021 and see what happens to the market then.
The hardest hit market in 2020 was Downtown condos. For those waiting for the bottom of the condo market, it has already come and gone in the first week of December. January condo sales Downtown this year were 118% higher than January of 2020 (whereas the overall market was up by 52%). For January, the sales-to-new listings ratio was at 75% - back into ‘sellers’ territory. The Humber Bay Shores market experienced an increase in sales of 85% this January over January of 2020 and a sales-to-new listings ratio of 87%! Table 1 tracks the sales-to-new listings ratio by month from September through to January to illustrate the market change.
SALES-TO-NEW LISTING RATIO BY MONTH (SEPT 2020 - JAN 2021)
1. Downtown Condos more affected by COVID-19 than Humber Bay Condos
2. Market turned in the first week of December. A shortage of new listings in December has improved in January.
source: Toronto Real Estate Board
14 YORK - ICE CONDOS 2
We wanted to test the impact of COVID-19 over 2020 on Downtown condos. We picked Ice Condos because there were a significant number of sales and it has been at the centre of Airbnb rentals which have since been banned by the building because of COVID-19 and severely restricted by Toronto. We looked at 5 sales in 2021; 5 sales from September to the end of November; and 5 sales from April through to June. All sales were one bedroom or studio units without parking. Our conclusions may surprise you.
1. Prices were virtually unchanged over 10 months with the average at just under $1100 psf
2. The sale price-to-list price ratio was also unchanged at 99%
3. The only change was that average days-on-market dropped to 15 for January listings versus 33 days back in the April -June period
Now there were other condo buildings Downtown that did experience price drops of 5%+ but that can largely be explained by a corresponding drop in sales in the same building.
Image source: theicecondos.com
With COVID-19, price not location is the primary reason for increased demand by Region
source: Toronto Real Estate Board
RENTAL COMMENTARY
Unlike the condo market, the rental market continues to suffer. Rents are approximately down $500 per month from January of 2020 versus January of 2021. Average prices by bedrooms are shown in Table 2 below.
On the positive side, leasing activity this January is more than double that of last January. A partial explanation is that tenants are simply moving units to get lower rents (like musical chairs). But also important is that ‘active’ listings for rent at the end of January 2021 are 23% lower than in January of 2020. The net effect is that last January the ‘months of inventory’ was at 5.4 and this year it is down to 1.8 months. At this level, and with International students returning to the Downtown market by Summer, we should have reached the bottom of the rental market in terms of prices. We expect rents for vacant units to move up by $200 per month at that time.
