December 3, 2020 | buyers
Let’s not kid ourselves. There have been very few times in the past twenty years that were favourable for Toronto buyers. It’s largely been a seller’s market since 2000 where buyers usually have to compete and tap dance for sellers on a given property. Not always. There were brief times where the market shifted to the advantage of the buyer. During the financial crisis of 2008, the market did bend to the buyer, but not for very long. There are also times, even during a heated market, that the buyer can end up on top. There’s not always competition. Still, the past 20 years have been overwhelmingly an advantage to the seller. Now that we have Covid-19 derailing our economy and changing the way we work, the Toronto real estate market has changed.
Are we now in a buyer’s market? Well, it depends what you’re buying. If you’re buying a house. Then no. It’s still a seller’s market. Competition has been stiff in most of the old city of Toronto. Interest rates are shockingly low, and what can be affordable has now improved for buyers, even for the ones who require a stress test at a higher interest rate.
The deals right now are downtown condos. Not all of them, but many of them. It’s not all condos. Condo townhomes are selling more like houses. Anything that offers more space in a low density area. The bigger the condo and the more downtown it is, the more you will see a drop in price. We have certainly entered a buyer’s market here, even though a few sellers are not willing to take in this reality just yet.
Smaller one bedroom condos in larger buildings will likely be the best deals. With AirBnb not happening right now, and rents falling, these investments are not as strong as they once were. Inventory is building. The trend at the moment is also to remote work. Remote work is tough to do in a one bedroom or bachelor apartment. So, they are becoming less desirable to keep for those who own those units or rent them out.
It’s not the ideal time to be selling these properties. But it is a pretty good time to be buying such condo apartments. Rarely have we seen such opportunity for buyers. Many buyers, however, are not seeing this as an opportunity. They think they are buying something that will fall in value, even more if they buy soon. I would agree that large condo apartment units are not your best option in a few buildings. You do have to be selective. I would also agree that it is difficult to time the market, but in early 2021 we are almost guaranteed that the economy will improve, and the things holding back condo sales will improve significantly.
It can be wise, sometimes, to buy in uncertain times, especially when you know those uncertain times will come to an end. Even without a guaranteed end in other uncertain times of past twenty years, it has been wise to buy. This was the case for those who purchased real estate in the pits of 2008 when everyone wondered if we were at the beginning of a crash. It was true in 2017, when the government brought in too many regulatory rules at once and many buyers went to sidelines. There is an historic logic to buy when things are uncertain. It is a risk. You don’t know when things will bounce back, but it is usually a rewarding risk.
I think there is an opportunity to buy condos downtown now at better prices than we’ve seen for awhile. With a vaccine on the way, we may see people wanting to rent downtown again. Short term rentals will be more in demand. Life in the city won’t circulate around lockdowns and our health and safety. And it turn, the suffering of the downtown condo market will recede quickly.
To be clear, I’m not suggesting we will go back to the real estate culture before Covid. We appear to be permanently moving toward a remote work culture that will make smaller, more expensive downtown condos less in demand, even after the pandemic. Regardless, I’m not sure it will be enough to offset the desire to live downtown.
I do I feel the time between now and the inoculation of the vaccine, there may be a window of opportunity in the condo buying sphere. It won’t last. This time next year, if you were considering buying a condo downtown, I have a strong feeling you’ll be wishing you made your move on your condo sooner.