If the first two months of 2020 are anything to go by, we’re in for another very busy year in the GTA condo market, with price growth in the double digits. We’re seeing a ton of demand – without the inventory to satisfy it. If you’re waiting around for the market to cool down, that won’t be happening anytime soon.
Spring is going to be intense.
I think prices will go up pretty aggressively in the next couple of months. Although the Toronto market is pretty hot all year round, spring is traditionally the busiest season. I expect there will be more inventory coming onto the market because of that, but also because Toronto’s new Airbnb rules now prevent investors from using units for short-term rentals. So those units will either switch over to long-term rentals (great for renters) or get sold (great for buyers). Those two factors may make life a bit easier for buyers, but demand will still outstrip supply in a pretty big way.
Here are some of the trends to watch out for:
We’re back to bidding wars again. Well-priced condos in good locations and good buildings are being listed with an offer date – which generally means bidding wars. Frustrating if you’re a buyer, but great news if you’re a seller.
Interest rates are expected to remain low. While rates have inched up a little bit, it’s still very cheap to borrow right now, which is driving sales. You can still get a five-year fixed anywhere between 2.5 and 3%, depending on the borrower and the property.
Condos under $1M are in hot demand. Condos are still the first rung on the ladder: for a house in the city, you’re looking at seven figures, so condos become the de facto entry-level option, despite increasing prices.
There aren’t enough rental units in the city to meet demand. As a result, units that do come up are expensive. Bidding wars for rentals aren’t uncommon. And the condos the city is hoping to free up with the new Airbnb rules haven’t materialized yet because Toronto hasn’t started enforcing those rules. So investors are still doing short-term rentals and keeping properties off the long-term rental market. It will be interesting to see what happens once the city does start enforcing things.
Reaching your goals is possible
In an environment like this, how do you buy or rent a condo in the city without constantly losing bidding wars or completely breaking the bank?
RENTERS AND BUYERS: adjust your expectations. This will be a year where there’s a continued adjustment in terms of a buyer’s expectations area vs. the reality on the ground. If you want that 900 sf condo downtown but you can only afford $2,500 for rent (which in the past has been more than enough), you’ll have to compromise. So people are looking farther afield, in softer parts of the city (generally outside the core), or they’re moving to places like Hamilton, Waterloo, even Barrie, and commuting in and/or negotiating more flexible work from home options. If you’re not willing to sacrifice on location, you’re looking at moving in with a roommate instead of getting a place by yourself.
RENTERS AND BUYERS: Work with a specialist. The market is demanding that real estate agents add value to the process, and one way we do that is by becoming hyper-specialists in certain areas. So, for example, if you want a condo in Richmond Hill, I’m not your guy. (I don’t even know how to get to Richmond Hill.) But if you’re looking for something downtown, that’s where I can help you figure out where the value is, how quickly sales are happening, and give you insights on specific areas.
RENTERS AND BUYERS: Do your due diligence. I’d be lying if I said all the deals on the market right now are good deals. Getting yourself up to speed before you start looking protects you as a consumer. Condos.ca helps you analyze the market and really start to identify where there might be opportunities, and which buildings or listings are perhaps underpriced or overpriced. Once you have that info under your belt, and something does come along, you can act quickly. Seriously, speed is everything in this market.
RENTERS: Have all your documentation ready to go. The good stuff is turning around in 24-48 hours – if you scramble to get credit checks and bank statements, you’ll miss out. Have your credit score, letter of employment, bank statement, etc. ready to show the landlord, and have your references all teed up to give the landlord something they can accept on the spot.
SELLERS: Price your property right. If you want to sell, this spring market is as good a time as you’re going to find because rates are low and demand is high. But remember, if you’re upsizing/downsizing and planning on staying in town, you’ll do well on the selling side, but then face the same competition as everyone else. An area specialist can ensure your property is priced, presented and promoted right so you can maximize the selling price and position yourself better as a buyer.
As Toronto continues to grow as the economic heart of the country, attracting big, global firms like Microsoft and Google (along with 170,000 new residents a year!), demand for condos to buy and rent in the downtown core will only go up. To achieve your goals, you’ve got to be patient, remain disciplined, get to know your market and don’t overextend yourself. And that’s a lot easier when you’re working with someone who hyper-specializes in what you’re looking for, so reach out to a Condo Pro when you’re ready to rent/buy/sell.
About Andrew Harrild, Co-Founder, Sales Representative.
Andrew is a licensed Realtor with a background as an investment analyst in commercial real estate financing. He lives in the Beaches, where you might spot him playing soccer, or perhaps appreciating the occasional dram of whisky.