Navigating Toronto’s condo market this spring? Here’s what to expect

This article is the third in Global News’ Spring Housing Buzz series, where we will investigate a number of different areas related to the spring real estate market in Ontario. You can read Part 1 here and Part 2 here.

Sales are starting to blossom, new listings are beginning to flourish and viewings are sprouting: you could say that Toronto’s condo market is finally in bloom.

However, the sun wasn’t always shining in Toronto’s condo market, which faced its share of significant challenges as it closed out last year.

High borrowing costs and ongoing concerns about affordability cast shadows over the local condo market, pushing many buyer hopefuls to the sidelines and resulting in quarterly sales hitting their lowest point in over a decade during Q4-2023.

The Toronto Regional Real Estate Board’s (TRREB) recently released Condo Market Report revealed that condo sales in the fourth quarter of last year were not only down 3.4 per cent on an annual basis with 3,446 units sold, but also the lowest quarterly sales recorded in the region since TRREB first began publishing condo market data in Q3-2011. Even during the onset of the pandemic in Q2-2020, sales were still higher, with 3,459 units sold, according to the TRREB condo report.

Interestingly, while condo sales experienced a decline in the lead-up to the start of 2024, the number of new listings coming to market surged in the fourth quarter, rising by 29.3 per cent annually. This increase in listings helped balance the condo market and ultimately contributed to a slight downturn in prices.

In Q4-2023, the average sale price for a condo in the Greater Toronto Area (GTA) was $702,142, marking a 1.1 per cent annual decline. However, within the city of Toronto, which accounted for over two-thirds of the region’s sales activity, the average price dipped further to $720,456, reflecting a 2.4 per cent decrease compared with the previous year.

While the local condo market, similar to other housing segments, witnessed a notable decline in activity in the wake of the Bank of Canada‘s (BoC) interest rate hikes in early 2022, it seems as if Toronto’s condo sector is gearing up to change course.

Amid the ongoing challenges, there is anticipation building regarding the bank’s upcoming actions. After maintaining interest rates at five per cent for five consecutive meetings, the BoC is expected to initiate rate cuts by mid-year, potentially influencing market dynamics — a move that TRREB president Jennifer Pearce says would stimulate additional interest in home ownership.

“Lower rates are key to understanding the direction of buyer activity as we move through the spring and summer markets. We have recently seen a resurgence in sales activity compared to last year. The market assumption is that the Bank of Canada has finished hiking rates and a growing number of homebuyers have also come to terms with elevated mortgage rates over the past two years,” Pearce said.

“Consumers are now anticipating rate cuts in the near future and lower interest rates in the second half of the year will further boost demand for ownership housing.”

Following a year of uncertainty, fuelled primarily by aggressive rate hikes, buyers who had previously hesitated on the sidelines are now shifting their expectations for their potential purchases and the prospect of decreasing interest rates is instilling confidence among them.

Spring is definitely in the air as more units are being listed for sale, showings are increasing and condo sales are up 7.2 per cent from a year ago, according to the latest TRREB data.

According to Right at Home Realty president John Lusink, the stir in activity can be linked to the exceptionally warm weather Toronto’s been experiencing recently.

“The current crazy weather we’re having has seen an uptick in activity. And how do we know that? Well, I can tell you, for example, one of our brands, which is the condos.ca, property.ca brokerage brand, we look at site statistics, for example. And so we’ve seen an increase of viewing requests of 42 per cent just over the last month,” Lusink said.

Lusink said Right at Home Realty saw an increase in showing statistics across its 10 offices, which are located across Ottawa up to Barrie, over to Burlington and Niagara and through the GTA.

“We saw an increase in showings of 32 per cent since January through February,” Lusink said. “Clearly, people are interested. We’ve seen that across both condos and of course, low-rise residential.”

Matthew Gravina, a Realtor with Real Brokerage, told Global News he’s also seeing an increase in activity.

“As far as showing activity is concerned, we’re seeing more people go and inspect condos. They’re going through the motions, pre-approvals have been up dramatically through January and February basically compared to the last six months of last year,” Gravina said.

For Gravina, it’s not so much the weather that’s helping bring the buyers back to the condo market, but rather that buyers who have been patiently waiting on the sidelines are finally starting to come to terms with the current real estate landscape.

“I think people are starting to say, ‘Hey, you know what, this is the new reality. If I want to own real estate, I either got to get on board or I have to just sit here and let the bus go by.’ And I think that’s what a lot of people are starting to do.”

With more interest rate decisions slated in the coming months, attention remains on the BoC to see what will happen next with borrowing costs. Pearce says if the bank holds and possibly lowers interest rates, stronger demand will likely occur in 2024.

Gravina echoed that sentiment and said he thinks the strength of the condo market is going to be directly correlated with what happens with interest rates.

“I personally don’t expect interest rates to come down until probably closer to September. And I think that’s because the BoC doesn’t want to drop rates in the heat of the spring market when people are most active. I think the BoC is going to be very cautious, especially now that we are seeing that people are transacting and kind of making decisions based on where rates are today,” Gravina said.

He noted that if we do see rates come down toward the end of the year and more into 2025, he thinks there will be a sizable increase in the number of transactions that will take place within the condo market.

As the construction of new condo developments slowed over the past few years, some developers put projects on hold and delayed completions in the city. This, coupled with higher interest rates, has impacted supply.

Marcus Plowright, a Realtor in London, Ont., told Global News markets like Toronto are a “very different animal” compared with a city like London.

“Something that started five years ago may not even be finished yet, but it sold four years ago at pricing that was established four years ago,” Plowright said. “And then people are struggling to get mortgages on those properties because they don’t appraise them by the time they’re finished. So, the inventory of condos in the Toronto market, where there are a lot of buildings going up, is impacting that market, whereas in London we don’t really have that carry-over burden.”

Lusink described a similar situation and called it the “off-market assignment marketplace.”

“A lot of people who bought into the pre-con hype in the last few years, as they’re coming up now to actually close, they are realizing that they aren’t going to qualify, and they are trying to unload,” Lusink said.

He says this is impacting the existing condos that are already built and available in the market.

“There are some buyers saying, ‘Hey, maybe I can pick one of those ones that are close to being completed but for a much better price because those people have to sell, and they can’t close.’ So, there’s a bit of turbulence in the market,” Lusink said.

As a result, Lusink says he expects to see a “softening” on condo prices in the coming months and some units will likely sit on the market for longer.

Those thinking of buying a condo in the coming months need to align themselves with a condo sales expert, Lusink says.

“They should do their homework and align themselves with the right person. And then the next thing is, whether it was a condo or low-rise, is please get pre-approved,” he said.

Lusink also noted that buyers shouldn’t be in a rush.

“I think with the condo market, I would really take the time to search the market because I think there’s a lot more that’s going to be available, so they should really take their time.”

As for those planning to sell in the coming months, Gravina said that sellers really need to do their homework.

“Sellers in the condo market in Toronto, and urban Toronto specifically, have been spoiled over the past few years … with the exception of last year,” he said. “If you own a condo, and you were in a position to sell, all you needed to do was hand your keys off to an agent, they put it on the market, they could take photos on a flip phone, and the thing would sell. And it would sell for record numbers. That was the reality of the market, where today, that’s not really the case.

“Don’t just hire your cousin who is a plumber and has their real estate licence and expect amazing things if that individual isn’t super tapped into what’s going on in real time and not using data from the month before.”

Gravina also noted that sellers should take the time to consider if any work can be done on their unit to help them get a better offer.

“Do your own research as far as what you think a realistic price is going to be and then start to assess and say, ‘You know what? I’ve lived in this condo for five years, I haven’t spent a dime on anything. If I was to go in and redo the floors, let’s say redo 500-600 square feet of floors, give the place a coat of paint and that costs me 2,000 to 3,000 bucks, whatever the case may be, is that going to amount into $10,000, $15,000 or $20,000 in value?’ Because then, to me, that’s a no-brainer, especially understanding that today people want turnkey.”

As the spring market unfolds, eyes will remain on the sky and on the condo market to see how things unfold.

Pearce says she expects that “record population growth, a resilient economy, low unemployment and declining mortgage rates in the second half of the year will result in increased home sales compared to 2023.”

“This will be the start of a multi-year recovery as some households will still face affordability challenges, even as borrowing costs begin trending lower. As the demand for housing picks up, it will be equally important to see a rebound in the supply of homes,” she added.