Condominiums and the CN Tower in Toronto skyline on April 25, 2017.COLE BURSTON/The Canadian Press
Some buyers are sorting through the Toronto-area condo market and cherry-picking deals in a segment with plenty of inventory to choose from.
Anna Wong, real estate agent with Strata.ca, says buyers are feeling more confident after the Bank of Canada held its key interest rate steady at its latest policy-setting confab.
“People are feeling a little bit more optimistic,” she says.
Soon after the announcement, she helped one couple negotiate the purchase of a one-plus-one bedroom condo in Toronto’s west end after a two-month search.
The unit was listed about six months ago with an asking price of $789,000. Ms. Wong says a comparable unit in the same South Kingsway building sold above the $900,000 mark in 2022.
After the price was trimmed a couple of times, her clients were able to strike a deal in the low $700,000s.
“In a better market, this would have gone quickly.”
Ms. Wong notes that condos lagged behind during the rebound in sales of single-family homes in late December and January.
“People jumped on houses if they could afford them,” she says. “Condo prices weren’t coming down drastically.”
After a spurt of buying, sales calmed down last month.
Manu Singh, real estate agent at Right at Home Realty, has seen some wavering from potential buyers who are living in a rental apartment or condo and tired of paying high monthly rates but also hesitant to buy while interest rates are high compared with recent years.
“People think that rates can’t do anything but go down – the question is when,” Mr. Singh says.
Bank of Canada Governor Tiff Macklem has remained tight-lipped about the timing of future rate cuts.
Meanwhile, sales in the GTA in February fell 12 per cent on a seasonally adjusted basis from sales in January, according to National Bank of Canada economist Daren King.
Mr. King notes that the pullback comes after a 33.9-per-cent rebound in transactions over the two previous months in the wake of a dip in fixed mortgage rates.
Mr. King expects the low vacancy rate in the rental sector to continue to support the level of sales in the resale market in the months ahead, despite the challenge of affordability.
The active-listings-to-sales ratio remained relatively unchanged in February, indicating the overall market is in balanced territory, he adds.
Sales in the condo segment were softer, with a 16 per cent seasonally adjusted decrease in February from the previous month. Active condo listings at the end of the month stood 5.5 per cent higher, marking a ninth consecutive increase and a record high, Mr. King points out.
Conditions in the condo market were approaching the loosest on record at the end of February.
The market pullback in February suggests to Mr. Singh that a resurgence many sellers were hoping for may be delayed.
“We might have a little bit longer for deals to be had on the buy side,” says Mr. Singh.
With the central bank holding interest rates steady for five consecutive meetings, Mr. Singh says the number of properties being sold under power of sale is on the rise.
“The condo side is more well-supplied and there are more investor-owners who are feeling the pinch,” he says. At one point “months of inventory” – which is a measure of how long it would take to sell the available supply at the current pace of sales – had swelled above seven months.
In many cases, lenders are selling after an investor has defaulted on mortgage payments, he says, and the properties are often unattractive. They tend to be in rundown buildings and poor locations because such investors often did not have strong finances to begin with.
More recently, power of sale properties have been popping up in desirable high-rise buildings.
“We never used to see these,” says Mr. Singh. “Now we’re evaluating these on a regular basis.”
Mr. Singh spotted a unit for sale on the 47th floor of a prime downtown tower at 33 Bay St. A lower-tier private lender was selling the unit with an asking price of $995,000 and the tenant was blocking showings.
Another buyer had quickly submitted an offer but it was conditional on being allowed to see the unit.
“They had a tenant in there, which was very, very, very tricky,” says Mr. Singh.
Mr. Singh knew the complex through work with his investor clients so he was familiar with the floor plan and the condo corporation’s financial picture.
The listing agent had included an “escape” clause in the agreement that allowed the seller to work with another offer if a rival bidder came to the table.
Mr. Singh’s client submitted an offer below the asking price but with no conditions, knowing that it was risky to buy a unit without seeing it.
The gamble paid off, Mr. Singh says, because the tenant who appeared unco-operative turned out to be a very good tenant once they learned the buyer was fine with allowing the tenant to stay.
The buyer was willing to offer a very fast closing of three weeks.
When the deal was done, the buyer paid $970,000 for the 990-square-foot unit with two bedrooms, two bathrooms and water views.
“It was a very unique transaction,” says Mr. Singh.
The more positive signs in the market are encouraging potential sellers to prepare their properties for sale, says Ms. Wong.
She has been hearing from clients who want to make the move from a condo to a house.
Ms. Wong notes that sellers who want to reap a higher profit on the sale will also have to purchase in a more buoyant market.
“It’s a delicate time,” she says.