The “fear of missing out” that set the Greater Toronto Area’s real estate market ablaze in early 2017 appears to have flared up again in 2020.
First-time buyers are competing vigorously for one-bedroom and two-bedroom units at prices up to $1-million. In Little Portugal, a one-bedroom unit received 32 offers.
Real estate agent Al Daimee of Royal LePage Signature Realty has been shocked by the “really rapid action” in the condo market so far in 2020.
“It feels a lot like 2017.”
Just as it was in the first quarter of 2017, the market today is characterized by frenzied competition for properties and run-away prices. In April, 2017, the government of Ontario introduced new rules – including a foreign buyers tax – that doused the flames.
Many deals fell apart in the months afterwards and the market remained cool for a couple of years.
But so far the price gains in 2020 are more modest than those in the high-octane first quarter of 2017, when prices soared more than 30 per cent compared with the same period in 2016.
According to the Canadian Real Estate Association (CREA), the benchmark price in the GTA in January jumped 8.5 per cent from the same month in 2019. Shaun Cathcart, CREA’s senior economist, pointed to a larger-than-normal drop in new listings in many markets this January.
Mr. Daimee recently worked with one young first-time buyer who is keen to move out of his parent’s home and into a condo in the core.
“It was really eye-opening as the weeks went by,” says Mr. Daimee, who realized that buyers were stepping forward as soon as new units arrived on the market.
“Buyers are fearful of being priced out.”
Resale condos that were selling for $1,000 a square foot downtown a few months ago are now fetching $1,100 or close to $1.200 a square foot in some cases.
Mr. Daimee’s client was aiming for a unit of 700 square feet or more and he was willing to pay up to $1-million.
But there were few units to look at and bidding contests were common. He missed out on a few units when he wasn’t available the first day they arrived on the market.
In early February, the client didn’t want to lose out on a two-bedroom unit with an asking price of $925,000 in a nine-year old building near the foot of Bay Street. He submitted an offer the first day the 782-square-foot property landed.
Then they learned the sellers wouldn’t be available to deal with the offer until the evening.
“It was really frustrating because the sellers stalled,” Mr. Daimee says.
Sure enough, two more buyers submitted offers by that evening. Mr. Daimee’s client had to pay $7,000 above asking in order to secure a deal for $932,000.
Mr. Daimee says that being first-off-the-mark gave his client an advantage because he had all day to review the condo corporation documents and therefore he was able to make his offer without conditions. But he warned the client that, based on past sales in the area, he was paying a premium.
“He was concerned that if he waited for another property, prices would go up even more.”
Meanwhile, condos selling in the preconstruction phase are commanding $1,400 a square foot or more.
Mr. Daimee says he is sometimes “baffled” that buyers are willing to pay more for a unit years from completion than they are for a unit that’s already built and ready for occupancy. But most people buying units preconstruction are investors, he says, and they only have to come up with the down payment upfront.
“Investors don’t like getting into a bidding war and paying a premium,” he says. “They all expect prices to continue to increase.”
Meanwhile, the city’s extremely tight rental market has eased in recent months. Many of the cranes atop new buildings came down as projects were completed in 2019.
Many of those units in newly finished buildings were purchased by investors, who have in turn placed those units on the rental market. At the same time, Mr. Daimee says, many of the purchasers jumping into the condo market lately have left rental units vacant.
“There’s a lot out there,” Mr. Daimee says.
He points to one unit of more than 900 square feet which was rented for $3,500 a month. It came back on the market and sat for a bit so the owner reduced the price to $3,300. Even at the lower price, the unit has had no showings, Mr. Daimee says.
“There’s just not much interest in renting.”
Mr. Daimee notes that the rental market tends to ebb and flow over time. Many projects are slated for completion in the next two or three years, he notes, but the population is swelling with immigration and a strong jobs market.
“It remains to be seen” how the rental market will adapt, he says.
Another reason for the uptick in rentals, agents say, is that stricter rules surrounding AirBnb and other short-term rentals recently came into effect. Now operators of short-term rentals can only provide accommodations in their principal residence. As a result, some condo unit owners are selling, while others are keeping the furniture in place and switching to a longer-term rental.
“I’ve seen a spike in furnished rental,” Mr. Daimee says.
Manu Singh, a real estate agent with Right at Home Realty Inc., recently leased a lower penthouse with three bedrooms and 1,400 square feet to a venture capitalist from New York.
Mr. Singh says the executive will be in Toronto for several months working on the acquisition of a Toronto start-up.
He listed the condo unit with an asking price of $4,750 a month but, after negotiating, the businessman signed a lease for $5,500 with furniture included.
“In larger condo rentals, I’m really seeing an uptick,” Mr. Singh says.
He figures the strategy is good for condo owners who can no longer use the unit for short-term rentals. By renting the unit with high-quality furniture, they can command a higher price. They also have less hassle and expense from the constant turnover and cleaning.
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