January 14, 2021 | condos
I have never really seen a busy December condo market in Toronto. Traditionally, it’s pretty quiet. In fact, it is, statistically speaking, the slowest month of the year with the fewest transactions. Simply put: it’s pretty boring. That is, until December 2020. This past year, with Covid cases rising and a struggling condo market downtown, many would have expected December to have been slower than usual.
Well, that didn’t happen. According the the Toronto Real Estate Board, stats for December of 2020 came in at 1,551 transactions. To put that into perspective, there were 882 condo apartment sales in December 2019. That’s a 75.8% increase year over year. That’s not boring. And in case you think that maybe December 2019 may have had lower than average numbers, I can tell you that December 2018 had 841 transactions and December 2017 had 1115. So, it’s much higher than the previous three years.
Now, before Toronto condo owners become excited that people have returned to the condo market in large numbers and condo demand is back in town again, let me offer you this statistic: Prices were down. From December 2019 to December 2020, prices fell 4.6% for condo apartments in Toronto.
It’s a head scratcher on the surface. So let’s recap. We have many more people buying condos than any other December, but prices have gone down. That’s a very unusual combination. Simple supply and demand says this: As demand increases, supply goes down and prices go up, but in December 2020, demand went way up and prices went down.
This may lead you to have some some questions like:
WHY ARE SO MANY PEOPLE BUYING CONDOS IN DECEMBER 2020?
Considering that we were in a lockdown in December and the Covid numbers were rising, one would expect that there would be few condo sales. People may think this based on our experience in the Spring of 2020 when we were new to the pandemic: As the Covid numbers grew, people withdrew from buying real estate, and on the flip side, as Covid case number fell, people returned. I would have expected the same for December, but that was not the case. People did not pull back on buying properties as the Covid numbers rose in the Fall or December. I don’t think this means most buyers were irresponsible, and don’t care about public safety.
I do think that the news of a vaccine planted the idea that the condo market’s struggle may have an end date with a vaccine. I think that’s a reasonable assumption to make. Suddenly, we could all see that at some point in 2021, there would be no more lockdown. Renters would start returning. Immigration would pick up again. Many of the things that held back the condo market in Toronto would be gone. It certainly doesn’t feel that way in January 2021. We are far from that, but a vaccine does tell us that this should end or be greatly reduced this year.
It’s not just the hope of a vaccine though. It is also that the month of December often distracts buyers and sellers alike with Holiday parties, vacations and responsibilities. This takes them away from thinking about real estate. Those parties and gatherings were gone this year. People had a lot more time to contemplate their future and focus their energies on real estate – mostly online during a lockdown.
Then there’s the low interest rates. They certainly do make it easier for people to buy.
You may also ask:
WHY DID PRICES GO DOWN IN DECEMBER FOR CONDO APARTMENTS IN TORONTO?
I do think for Toronto condo owners, the large number of people buying in December is a positive sign. Over the course of Covid, however, there was more inventory than usual that had built up, and caused prices to slip, particularly downtown. Some properties were on the market for a long time before they were snapped up by buyers in December. Because condos were not selling in great numbers during the pandemic, there was more supply. So, we had more buyers but also more supply. Those condos prices in December were also the result of the months of stresses Covid had put on the condo market in Toronto before December.
WHAT DOES THIS MEAN FOR 2021 FOR TORONTO CONDOS?
Well, it may mean that the condo bounce back is under way. If that’s the case, the best time to have bought a condo last year was likely around November 2020. But I’m not sure the bounce back is so final. I do think a bounce back is coming this year, but it may sputter a few times before picking up steam again. Covid is still very much affecting our economy, and there may be more fall-out after the government financial assistance programs are done for those unable to work during the pandemic. Mortgage deferrals from last year will end soon. So there may be a reckoning of sorts for those who have deferred their mortgages and are still unable to pay it. Despite this, I’m of the mind that people returning to the condo market is a positive sign for the condo market in 2021. The January stats will tell us if this is an ongoing building trend or just a blip.
WHAT ABOUT TORONTO HOUSE?
Toronto houses also saw an increase in the number of sales for December 2020. If we take detached houses in Toronto, we have 657 sales in December 2020 as opposed to 463 in December 2019. That’s up 42%. Not as dramatic as the condo apartments, but still impressive. Unlike condo apartments in Toronto, detached houses were up 8.07% in price from December 2019 to December 2020.
In many ways real estate in the Toronto condo market will be interesting to monitor at the beginning of this year. I suspect for condo buyers, there will still be some deals to be made. December may be an indication as to what to expect in the start of 2021. But we all know, there are no guarantees. There are many things that could throw off the Toronto real estate recovery in the condo apartment market. I still think it can be a good time to buy a condo. Rates are lower and prices are challenged. I’m not sure the sale will last all year.