Activity in Canada’s downtown condo submarkets was lackadaisical in 2020, but, if January was any indication, that’s likely not to be the case for the remainder of this year.
“Canada’s housing market frenzy was in full force in January. Buyers scooped up virtually every unit they could—even downtown condos,” said an RBC Economics report from Robert Hogue.
“Condo price trends are comparatively weaker [than single-family homes]—due to plentiful inventories in the downtown areas of Canada’s largest cities. That said, the growing affordability advantage over single-family homes and the start of vaccination distribution (interpreted by some investors as a sign downtown condos will soon regain popularity) have rekindled buyers’ interest in condos over the past couple of months. This could lead to a firming of condo prices later this year.”
In Canada’s largest city, not even surging COVID-19 infections and, by extension, strict lockdown of non-essential businesses has daunted buyers. Although home sales in Toronto shot up by 52% last month compared to January 2020, active single-family detached listings declined by 40% during that period and sparked bidding wars, which in turn caused condo sales to skyrocket more than 85% year-over-year in January. In fact, condo sales were so dominant during the first month of the year that they vastly outpaced detached home sales, which only saw a 34% increase compared to January of last year.
“Renewed demand for condos was seen throughout the Greater Toronto region, including the core 416 area,” said Hogue’s report. “Relative affordability may also be boosting condo appeal. Condo prices have been stagnant since the pandemic began—up just 1.7% year-over-year in January in the region—whereas detached home prices have grown exponentially not just in the Toronto region (up 16.6%) but also in most other southern Ontario markets.”
Toronto’s condo market isn’t likely to see prices suddenly upsurge because active listings in January increased 85% year-over-year, thereby ensuring that a plethora of supply keeps prices in check. However, Hogue warns that could change in a heartbeat.
“The inventory situation is evolving rapidly, though. Active condo listings stood 177% above year-ago levels in November. At the rate things are going, condo prices could well begin to heat up later this year.”
The city had no shortage of buyers last month, but strict lockdown measures, including a curfew, prevented sellers from listing their homes. New listings dropped by 11% year-over-year in January, the first decline in eight months. A paucity of single-family homes for sale redirected buyers towards Montreal’s abundant condominium inventory.
“Condo buyers were especially active on the North and South Shores, where sales surged 46% and 30% year-over-year, respectively,” said the report. “Very tight demand-supply conditions kept a fire under single-family home prices, driving the median price up 23% year-over-year. The heat is increasingly transferring to condo prices with the median rising 17% year-over-year last month. The composite MLS HPI was up almost 17%.”
Home sales in Canada’s third-largest city have been torrid since summer, and while buyers prefer single-family homes, they’re turning to the condo market in droves because supply isn’t as constricted.
“Condo resales surged 47% year-over-year last month. Contrasting demand-supply conditions are keeping single-family and condo price benchmarks on diverging tracks. Single-family prices accelerated to 10.8% in January whereas condo prices eased to 2.2%.”