Larger condo units emerge as affordable alternatives to detached homes

The popularity of Toronto’s small condominium units dipped last year because of the COVID-19 pandemic and short-term rental regulations, but as the city’s red-hot freehold market remains financially prohibitive, larger units have emerged as a reliable option.

“Condos are still considered an affordable entry point for first-time buyers, so it’s not like demand just disappeared. Condos help people get into the housing market,” said Dalia Barsoum, president and principal broker of Streetwise Mortgages. “You’ll see most of the demand in the bigger units as opposed to the smaller ones, especially since the prices of those larger units have come down. It becomes an attractive alternative to a detached house.”

Condominium sales have started rising again, and very quickly, perhaps because detached housing has become even more cost prohibitive while condo prices have concurrently softened. In the City of Toronto, condo sales surged by 75.9% year-over-year in December and the average price declined by 4.7%, according to the Toronto Regional Real Estate Board (TRREB). Moreover, GTA condo sales in the first two weeks of January shot up 90% year-over-year on the MLS.

“During the last couple of months, I’ve seen more interest on the buy side from folks looking to get pre-approved and start shopping,” said Daniel Johanis, principal broker of Pekoe Mortgages. “People aren’t exactly expecting a downturn in the market, and when they look for affordability they have to look outside of their areas and consider moving elsewhere.”

Except not everybody can afford detached homes, even in suburban areas. According to the TRREB data, the average sale price of a detached GTA home was $1,240,632 last month. Furthermore, not everybody is willing to relocate to the exurbs in pursuit of spacious homes—especially not when the mean price of a City of Toronto condominium in December declined by 4.7% year-on-year to $625,828. The result is that two- and three-bedroom condo units have become very affordable options.

Asked about surging condo sales during the first two weeks of the year, Frances Hinojosa, mortgage broker and managing partner of Tribe Financial, says opportunistic buyers, impelled by low interest rates and moderating prices, are purchasing multi-bedroom units.

“What worked for people before COVID isn’t working now,” she said. “Some people are okay with the downtown lifestyle, but they’re upgrading where they’re living because they need more space for the family and for that home office.”