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Rising inventory, the absence of student renters, and would-be condo buyers looking to the suburbs have had a major impact on urban condo markets’ performance over the last 12 months.
Condo sales in two of Canada’s largest cities Vancouver and Toronto have consistently seen slower rates of sales activity compared to detached and townhome properties since the spring lockdown. Coupled with closed buildings amenities and quieter urban communities, these market hurdles don’t make for ideal condo selling conditions.
Despite these challenges, REALTORS® are learning to adapt in these uncertain times, and there’s a sense of optimism growing within the condo market as a COVID-19 vaccine is now being distributed across the country.
Christopher Bibby, salesperson and REALTOR® from Re/Max Hallmark Bibby Group Realty, and Matt Smith, a broker with Engel & Volkers Toronto Central, explain how condo sellers are being affected by the pandemic and how the market could look in the future.
Current situation for condo owners
From a seasonal standpoint, the end of the year and the first couple months into the next are the slowest times for condo sales. But with the COVID-19 pandemic still very much in play, the slowdown has only been amplified.
Both Bibby and Smith noted a drop in showings and offers coming in for condos towards the end of 2020, particularly during the fall and after Toronto entered its second lockdown in November. For deals that are going through, Bibby said asking prices tend to be five to 10% below what the condo unit is listed for. Meanwhile, Smith has seen closing dates extend from the typical 30- to 60-day period to as long as 160 days in an effort for buyers to take occupancy when lockdown restrictions are likely to be lifted.
Rules between condo buildings during lockdown have also been inconsistent, which can make coordinating showings on listings a challenge — some high-end buildings are not allowing showings at all, while other larger investor-driven buildings are not enforcing the same restrictions.
“There’s some buildings that are very, very strict and others that are very lenient, and that shows in sales volume when you compare buildings,” explained Smith.
Not all condo buildings in urban centres are affected equally by the pandemic. Smaller boutique buildings that are more owner-occupied have weathered the storm of COVID-19 better than high-rise towers, which tend to be more investor-owned and prone to the effects of a sluggish rental market, said Bibby. The desire to live in a condo building with fewer units has only increased in light of COVID-19, given the concerns around social distancing and shared amenities.
“These mainly investor-driven buildings, I think we’ll really only see those peaking out until the city (Toronto) is back at a relatively normal capacity, because a lot of those buildings were the most attractive options for renters, not so much end-users,” said Bibby.
How downtown condo REALTORS® and sellers are adjusting
Although the pandemic has thrown the condo market some curveballs, REALTORS® and their seller clients have been adapting along the way.
With many sellers in a high-equity position as a result of significant price growth in the condo market over the last few years, Bibby says he’s not sensing a big panic among sellers, even if they’re accepting offers for under asking price. On the flip side, buyers are now in a position to scoop up deals in urban centres with a wider inventory of condos to choose from and record-low interest rates to take advantage of.
The pandemic has prompted REALTORS® to become more strategic with their condo marketing and to change up their tactics. With urban buyers flocking to the suburbs, Smith has directed his team’s marketing efforts to the periphery of the city to appeal to suburban residents who might be looking for a part-time downtown pad.
Bibby explains with more of us spending time online during the pandemic, the need for a robust digital presence is more important than ever when selling a condo — virtual tours, floorplans and excellent photography on a listing are becoming essential for selling properties in a COVID-world where virtual first impressions are paramount.
“Agents really need to increase their budgets for marketing at a time like this, because if people are going to get out of the house and put on a mask and go into a building, I think they’d really want to make sure they know what they’re going to see and there’s no surprises,” said Bibby.
What this means for the future of condos
While the immediate future for urban condos may seem bleak, downtown markets and condo ownership could continue to evolve.
This year’s sluggish condo market performance will yield unusual sales statistics when comparing numbers from 2020 and 2021. Smith explains this drop will look similar to 2017 and 2018, when newly implemented provincial housing policy caused a decline in sales. Buyers and sellers should examine a longer period of historical data when evaluating condo trends to get a clearer picture of the market.
“When you’re comparing the 2018 number to those in 2017, it looked like this massive growth,” said Smith. “I always like to look at a five-year trend to see where things are going because in the short-term, you’re always going to have some volatility.”
Down the line, as cities begin to reopen again and life gradually returns to normal, developers may be influenced by COVID-driven buyer demands when planning new condo projects. The desire for better storage space and built-in features could be implemented in new construction buildings that make working from home easier, Bibby added. Meanwhile, the demand for smaller buildings and larger floor plans, a desire that existed long before the pandemic, is likely to keep growing.
“There’s not as much demand now for the smaller [unit] product, so I think that might encourage the builders to start listening to what the market is saying, but there’s been a demand and a void in the market for that type of larger boutique product for a long time,” explained Smith.
If you’re looking to sell your downtown condo, enlist the help of a trusted REALTOR® who can help you navigate the ever-changing condo market. Equipped with extensive market knowledge and quick-thinking problem solving, REALTORS® can guide you through even the most unpredictable market conditions.