It was a standard one-bedroom condominium in a high-rise building in Toronto's King and Shaw neighbourhood – 600 square feet with a parking space.
Realtor Tom Storey watched 16 offers flood in for the unit, which was listed two weeks ago by another agent in his firm. When the negotiations ended, it sold for more than $100,000 over the $420,000 asking price.
At another recent presales event for a new condo development in the Danforth area, Mr. Storey saw all the units sell out within two hours. Since then, he has helped many clients compete with multiple offers for other condos, especially in high-demand buildings in central neighbourhoods.
"It's pocket by pocket – it's not everything," said Mr. Storey of Royal LePage Signature Realty. "But for condo transactions recently, with everything I've had buyers buy, we're still up against two or three offers."
While many in Toronto's real estate sector are watching a steep downturn unfold and swapping stories of houses languishing without any purchase offers, the condominium segment of the market has been holding up far better – even looking unscathed in prime spots.
From the market's peak in April, the average condo price in the Greater Toronto Area fell 5.4 per cent by mid-July, but still remains 27 per cent higher than in mid-July last year, according to Toronto Real Estate Board data.
In the detached-home market by comparison, prices fell 16 per cent from April to mid-July, leaving the average house price just 6.6 per cent higher than a year earlier. The result is that much of the big runup in prices in late 2016 and early 2017 has been erased for the average detached home, but not for the average condo. Experts say a key reason for the different experience between the sectors is the greater affordability of condos, which continue to attract a larger proportion of first-time buyers who are still active in the market.
Todd Cowan, managing partner of real estate development firm Capital Developments, said all of his firm's current projects are sold out, and believes the strength in the condo sector is due to the accelerating price spread between condos and detached houses.
Over a five-year period from the end of 2011 to the end of 2016, the price difference between an average condo and an average detached house in the Greater Toronto Area more than doubled, stretching from about $244,000 to $575,000, making condos an increasingly better deal by comparison. As of mid-July, the average condo was still $503,188 cheaper than the average detached house in the GTA.
"I think that affordability is becoming a real issue and I think that in itself is one of the pillars of why the condo market has remained relatively stable," Mr. Cowan said.
Many condo shoppers are also first-time buyers, which means they do not have to list another property for sale in a falling market.
In the detached-house market, a greater portion of potential buyers are sitting on the sidelines because they are unsure whether they will get good value for their existing houses if they list them now when a glut of new inventory has already flooded onto the market.
"I think there's more mobility for a first-time buyer," said realtor Tasis Giannoukakis, co-owner of Century 21 Leading Edge Realty Inc. in Toronto.
"This allows them to take advantage of a perceived opportunity. … If I'm the first-time buyer, I have the ability to pull that trigger and not have the concern with selling my property."
The hottest slice of the condo sector appears to be the market for new preconstruction units, which continue to be snapped up with little sign of any market downturn.
The median price of preconstruction units listed for sale in the City of Toronto in the second quarter of 2017 was $769.48 per square foot, a steep increase from $633.92 in the first quarter, according to data from BuzzBuzzHome, a website that tracks preconstruction homes.
Greg White, vice-president at BuzzBuzzHome, said most of the price increase was due to a different composition of units available on the market in the second quarter, with most lower-priced condos selling quickly, leaving higher-priced units remaining on the market. That pushed the average price of available units higher in the period.
But Mr. White said the market for preconstruction homes remains strong and there has also been some general price appreciation in the sector. He said some buildings in Toronto have started seeing preconstruction units sell for more than $1,000 per square foot.
Condo developer Smart REIT created a ripple through the condo sector when it announced in June it had rapidly sold out the first two towers of its planned Transit City development in Vaughan and would launch construction later this year on the 55-storey buildings.
Because of that success, Smart REIT and its joint venture partners decided to offer preconstruction units in a third tower on the same site this month, which again sold out within days. Smart REIT and its partners sold a total of 1,716 new units in the project without a hiccup, despite general housing-market weakness.
A big part of the appeal for many consumers is the idea of owning a brand new home where they can be the first residents. But preconstruction condos also draw investors who want to speculate on price growth between their initial purchase date and the completion of construction, and they attract longer-term investors who want to rent the units to tenants.
Mr. Cowan of Capital Developments said the extremely low vacancy rate for condo apartments is giving investors confidence to buy, which adds an additional source of market demand that is less often present in the detached-home sector.
"The fact the rental-market fundamentals are really strong helps to support the condo market – it doesn't only rely on people buying to live there," Mr. Cowan said.
Vacancy rates for rental condo apartments "dropped to almost zero" in Toronto in the second quarter this year, according to rental tracker Urbanation Inc., while rents climbed 10.7 per cent in the quarter compared with the same period last year.
When the Ontario government announced new rent-control measures in April, extending rent control to cover all units in the province, many anticipated it would hit the condo market hard.
The fear was that it would deter investors from buying condo units to rent out to tenants if they knew they were limited in their ability to raise rents in the future.
The slowdown so far hasn't happened, however, and Mr. Cowan isn't surprised. He believes many condo investors are not pension funds with plans to hold the investments for decades, but are instead relatively short-term investors who know they can still raise rents when tenants leave and new ones come in.
"I think many condo buyers are thinking about the short-term income they can earn on the condo by renting it, they're thinking about the capital gains, and they may move into it or they may sell it," he said. "I don't think they are as fixated on whether they can grow rents over the long term."
Mr. White of BuzzBuzzHome said there are also no signs that any developers have abandoned announced plans to build new condo developments. The preconstruction market may be less frantic than it was earlier in the year, he said, but it is still strong and stable and developers are proceeding with all of their projects.
"We haven't seen any indication of any of these pipeline projects being backed away from, or cancelled or anything," he said. "I think people are rationally optimistic."
There is still a real possibility, however, that the condo sector is simply lagging other segments of the housing market and may face its own downturn in coming months.
Realtor John Pasalis, president of Realosophy Realty Inc., believes many first-time buyers who currently favour condos over houses will shift their sights as houses keep getting cheaper, reducing the price spread.
He said the two markets cannot move in opposite directions for long, especially if house prices weaken further in coming months.
"I don't think [strength in] condos will last forever – I don't see how it's possible in a market where houses are softening," he said.
"Already buyers are seeing prices for houses that they never thought they'd be able to afford, just because the market has softened up a fair bit … It has definitely opened up the possibility of buying a house again."
Mr. Pasalis believes it is particularly "out of whack" that preconstruction condo units are becoming priced higher than resale condos, which is a reversal of past trends. He believes buyers will eventually notice the price difference and abandon an out-of-date belief that buying new is the best way to save money.
"A lot of buyers don't sit there and do the math," he said. "They just feel like they're a VIP and they got in early and they're going to get a deal, but they're not looking at what resale condos sell for and whether this makes sense."
The condo industry's hope is that there is a core of buyers who don't want houses even as the price gap narrows – and are a large enough group to support pricing in the sector. Condo-unit sales were down 23 per cent in June compared with the same month last year and prices cannot hold up forever if demand continues to weaken.
Mr. Storey from Royal LePage believes there is a growing population in Toronto who choose condos for lifestyle reasons, and others who may never be able to afford a detached house, which still costs an average of $1.3-million in the City of Toronto. They are content to stay living in high-rise units, giving the market a base of support over the long term.
"When I look at downtown Toronto and how much land is left for development, I don't think condos are ever going to go down because everyone wants to live downtown and there is only so much space and it's still the most affordable option," he said.