Jaimie Walker figured she couldn’t go wrong owning a condominium in the historic St. Lawrence Market district in downtown Toronto which dates to the late 1700s.
Then the pandemic hit.
“It sat there for three months and three people came in, which was shocking,” she told Global News, referring to the low level of interest when she attempted to lease it.
Walker first rented the apartment from its previous owner, then bought it and planned, in turn, to rent it to someone else as a way to earn income.
Under ordinary circumstances, the investment plan seemed sound. But now, with nearby office towers nearly empty — downtown workers had fled to suburbs, some moving in with their parents — suddenly rentals were available everywhere.
Almost overnight, owning a downtown Toronto condo as an investment plan no longer seemed viable. Neither did the idea of selling the unit, as a flood of other condo investors in a similar situation had tried.
“It was getting to the point where I’m not going to get what it’s worth pre-COVID,” Walker said.
In no time, a seller’s market for condos had shifted dramatically.
“It’s totally a buyer’s market,” said Ari Armani, a real estate broker with Royal Lepage Signature Realty.
“COVID-19 had a huge effect on downtown Toronto’s prices,” he said.
With fewer people needing to work downtown, reduced numbers of foreign students needing accommodation, and almost no new immigration or foreign tourism to fuel short-term rentals, a housing glut had appeared in an area of Toronto with historically high demand.
“All of these factors make the downtown market a vulnerable one,” said Janet Yao, who owns a Toronto condo apartment as an investment, as do her parents. Both units are up for sale.
“It’s challenging,” Yao told Global News, explaining that there is almost no buyer interest in the properties at the moment.
Last week, the Toronto real estate consulting firm Urbanation Inc. reported that the total number of new condominium apartment sales in the Greater Toronto Area increased 30 per cent, year-over-year. But the record high 6,370 units was buffeted by a 10-year low in second-quarter sales, the period right after the pandemic was declared.
As a result, year-to-date sales were down 22 per cent to 13,454 units.
“This regional shift in activity is expected to continue as buyers gravitate to less expensive markets while the downtown area faces supply challenges in the near term,” said Shaun Hildebrand, Urbanation’s president, in a statement.
In October, Urbanation reported that downtown Toronto rental vacancy rates had increased to 2.8 per cent from only 0.7 per cent a year ago.
“The market will continue to face challenges heading into 2021 from restrained demand caused by COVID-19 and elevated supply levels,” Hildebrand said.
So what does this mean for investors who bought condominium apartments thinking they were a safe bet?
“It looks a little dark and dampening out there but I would really focus on what the future investment is, not necessarily what is happening today,” said Tom Storey, a sales representative with Royal LePage Signature Realty.
But in the near term, Storey cautions investors not to expect the returns they had counted on.
“I think expectations have to change,” Storey said, adding that for investors trying to fill their condo apartments, units are still leasing but owners have to adjust their price demands.
Jaimie Walker, the woman who initially ran into problems finding a tenant, and then saw the sales market collapse, got lucky.
Her boyfriend, a real estate agent, located a buyer for her unit and didn’t even list it on the market. The deal was signed in August and closed in October. Afterward, she saw more desirable units in her building on the market for $100,000 less than the price she accepted.
Others, needing to sell, aren’t so fortunate.
“I do feel for anyone who bought with the intention of it being an investment property,” she said.