‘The condo market right now is a ghost town’: Toronto has a record number of units for sale. Here’s why they aren’t selling despite a housing crisis
‘Something is wrong with the market when we have housing nobody wants and homelessness at the same time,’ says Coun. Gord Perks, Toronto’s planning and housing chair.
June 14, 2024
By Diana ZlomislicHousing Reporter
In the thick of a housing crisis, there is suddenly a record number of homes for sale in Toronto that nobody wants.
Near Jarvis and Dundas streets, realtor Jamie Page warned his clients two months ago that their condo’s unobstructed lake views, designer credentials and a balcony might not be enough to quickly bait a buyer. He’s not happy to be right. At the end of April, they dropped the price by $21,000 to $589,900 for 550 square feet, which is below average for that size and location. Still, no bites. Not even a showing.
“The condo market right now is a ghost town,” said Page. “I have zero action.”
With a growing number of Torontonians facing homelessness in the past three months — nearly 11,000 people including more families, according to a city report — a record number of condominium apartments, generally the most affordable form of housing, has flooded the city’s housing market.
The homes up for grabs are typically smaller-sized units that were built for investors like Page’s clients who are trying to cash out before their profit margin disappears.
Some realtors and politicians say the flatlining of Toronto’s condo market is proof the provincial government’s attempt to fix the housing crisis has backfired because it has catered to developers, investors and speculators instead of ordinary people who need somewhere affordable to live.
“Something is wrong with the market when we have housing nobody wants and homelessness at the same time,” said Coun. Gord Perks, chair of the City of Toronto’s planning and housing committee.
At the end of May, Greater Toronto had the highest number of condos for sale for any month in recent history with 8,183 apartment units on the market. The last highest number of active condo listings was 7,600 in October 2020.
Buyers are also shying away from investing in condos that are not yet built. Pre-construction condo sales are down 74 per cent this year compared with the 10-year average, Altus reports.
“We’re not building enough houses, and fewer and fewer lowrise houses, which means we don’t have anywhere for tomorrow’s families to live,” said John Pasalis, president of Realosophy, a Toronto-based real estate brokerage that specializes in housing market data analysis.
“Toronto’s housing market has prioritized micro-sized condos for investors over the past 20 years,” Pasalis said. “Mom and pop investors want small units. Policymakers didn’t step in to reverse that direction.”
The number of new listings for condos has increased 30 per cent since last May, Pasalis’s analysis of MLS property data shows. Suites in the 500- to 599-square-foot range grew by 49 per cent year over year. The average list price is $593,000.
“In many ways, families have been kind of shut out of the condo market,” Pasalis said. “It’s been dominated by investors so the price per square foot is very high.”
The average price for a resale condo in downtown Toronto is about $1,000 per square foot while presale condo units downtown are substantially higher at $1,500, which reflects increased labour and construction costs and the fact investors are willing to pay more.
Why would investors pay more?
“Most reasonable people would have the same question,” Pasalis said.
“Especially since 2020, many who bought (pre-construction condos) weren’t planning on closing,” he said, noting they planned to sell it on assignment — a legal transaction in which the original pre-construction buyer transfers the rights and obligations of the purchase agreement to another buyer. “It looked like a way to make easy money where you don’t have to worry about tenants and rent. You buy it, flip it and make $150,000 to $250,000.”
A spokesperson for the City of Toronto said there’s nothing it can do to stem the construction of small, investor-geared units. It has released guidelines for developers, encouraging them to think about young and growing families when designing “vertical communities” but can’t force them to make larger suites.
“The provincial government has been throwing gasoline on that fire by cutting development charges,” said Perks (Parkdale — High Park), “which further incentivizes investor and speculator parts of the market.”
Perks said he finds it difficult to articulate his outrage on this issue.
“The province’s solution to Ontario’s housing crisis has been to get rid of planning laws, development fees, the right of the public to have a conversation about the kind of city they want and magically it will be fixed,” he said. “Well, here we are at the end of the story and we’ve got empty condo units and people who can’t afford to live in the city. They were completely wrong.”
The province didn’t respond to the Star’s request for comment Thursday.
While the Bank of Canada cut its key interest rate by 25 basis points to 4.75 per cent last week, signalling some relief for potential homebuyers following a very aggressive period of rate hikes, the reduction is still not enough to help many qualify for new mortgages.
Realtors expect many buyers to remain on the sidelines for several more months, until the central bank issues a few more rate reductions.
In the meantime, sellers might consider spending a little more money to take their best shot at moving their condos.
“If I had a cookie-cutter unit in a 30-storey tower similar to a lot of other buildings out there, I’d try to make it look as good as possible, stage it and make it available for showings any time,” said Ira Jelinek, a realtor with Harvey Kalles.
Smart buyers are also taking full advantage of their negotiating power, added Page, a realtor for Royal LePage State in Ancaster. On another listing in Hamilton recently, a buyer asked Page’s client to lower the price, paint the unit and replace its flooring.
“My client didn’t agree but why not ask,” said Page. “Somebody might be fed up enough to want to get rid of it.
However, buyers shouldn’t expect prices to budge dramatically, Pasalis said. Not yet, anyway.
“Even though listings are at an all-time high, it’s still technically a balanced market,” he said.
Prices aren’t plummeting because many investors have equity in their properties and are trying to be patient. In this market, a sale can take 3.5 to four months, Pasalis said.
“Investors feel it’s terrible because they’re used to their investments selling in a week.”
Thank you Doug.
‘Something is wrong with the market when we have housing nobody wants and homelessness at the same time,’ says Coun. Gord Perks, Toronto’s planning and housing chair.
June 14, 2024
By Diana ZlomislicHousing Reporter
In the thick of a housing crisis, there is suddenly a record number of homes for sale in Toronto that nobody wants.
Near Jarvis and Dundas streets, realtor Jamie Page warned his clients two months ago that their condo’s unobstructed lake views, designer credentials and a balcony might not be enough to quickly bait a buyer. He’s not happy to be right. At the end of April, they dropped the price by $21,000 to $589,900 for 550 square feet, which is below average for that size and location. Still, no bites. Not even a showing.
“The condo market right now is a ghost town,” said Page. “I have zero action.”
With a growing number of Torontonians facing homelessness in the past three months — nearly 11,000 people including more families, according to a city report — a record number of condominium apartments, generally the most affordable form of housing, has flooded the city’s housing market.
The homes up for grabs are typically smaller-sized units that were built for investors like Page’s clients who are trying to cash out before their profit margin disappears.
Some realtors and politicians say the flatlining of Toronto’s condo market is proof the provincial government’s attempt to fix the housing crisis has backfired because it has catered to developers, investors and speculators instead of ordinary people who need somewhere affordable to live.
“Something is wrong with the market when we have housing nobody wants and homelessness at the same time,” said Coun. Gord Perks, chair of the City of Toronto’s planning and housing committee.
At the end of May, Greater Toronto had the highest number of condos for sale for any month in recent history with 8,183 apartment units on the market. The last highest number of active condo listings was 7,600 in October 2020.
Buyers are also shying away from investing in condos that are not yet built. Pre-construction condo sales are down 74 per cent this year compared with the 10-year average, Altus reports.
“We’re not building enough houses, and fewer and fewer lowrise houses, which means we don’t have anywhere for tomorrow’s families to live,” said John Pasalis, president of Realosophy, a Toronto-based real estate brokerage that specializes in housing market data analysis.
“Toronto’s housing market has prioritized micro-sized condos for investors over the past 20 years,” Pasalis said. “Mom and pop investors want small units. Policymakers didn’t step in to reverse that direction.”
The number of new listings for condos has increased 30 per cent since last May, Pasalis’s analysis of MLS property data shows. Suites in the 500- to 599-square-foot range grew by 49 per cent year over year. The average list price is $593,000.
“In many ways, families have been kind of shut out of the condo market,” Pasalis said. “It’s been dominated by investors so the price per square foot is very high.”
The average price for a resale condo in downtown Toronto is about $1,000 per square foot while presale condo units downtown are substantially higher at $1,500, which reflects increased labour and construction costs and the fact investors are willing to pay more.
Why would investors pay more?
“Most reasonable people would have the same question,” Pasalis said.
“Especially since 2020, many who bought (pre-construction condos) weren’t planning on closing,” he said, noting they planned to sell it on assignment — a legal transaction in which the original pre-construction buyer transfers the rights and obligations of the purchase agreement to another buyer. “It looked like a way to make easy money where you don’t have to worry about tenants and rent. You buy it, flip it and make $150,000 to $250,000.”
A spokesperson for the City of Toronto said there’s nothing it can do to stem the construction of small, investor-geared units. It has released guidelines for developers, encouraging them to think about young and growing families when designing “vertical communities” but can’t force them to make larger suites.
“The provincial government has been throwing gasoline on that fire by cutting development charges,” said Perks (Parkdale — High Park), “which further incentivizes investor and speculator parts of the market.”
Perks said he finds it difficult to articulate his outrage on this issue.
“The province’s solution to Ontario’s housing crisis has been to get rid of planning laws, development fees, the right of the public to have a conversation about the kind of city they want and magically it will be fixed,” he said. “Well, here we are at the end of the story and we’ve got empty condo units and people who can’t afford to live in the city. They were completely wrong.”
The province didn’t respond to the Star’s request for comment Thursday.
While the Bank of Canada cut its key interest rate by 25 basis points to 4.75 per cent last week, signalling some relief for potential homebuyers following a very aggressive period of rate hikes, the reduction is still not enough to help many qualify for new mortgages.
Realtors expect many buyers to remain on the sidelines for several more months, until the central bank issues a few more rate reductions.
In the meantime, sellers might consider spending a little more money to take their best shot at moving their condos.
“If I had a cookie-cutter unit in a 30-storey tower similar to a lot of other buildings out there, I’d try to make it look as good as possible, stage it and make it available for showings any time,” said Ira Jelinek, a realtor with Harvey Kalles.
Smart buyers are also taking full advantage of their negotiating power, added Page, a realtor for Royal LePage State in Ancaster. On another listing in Hamilton recently, a buyer asked Page’s client to lower the price, paint the unit and replace its flooring.
“My client didn’t agree but why not ask,” said Page. “Somebody might be fed up enough to want to get rid of it.
However, buyers shouldn’t expect prices to budge dramatically, Pasalis said. Not yet, anyway.
“Even though listings are at an all-time high, it’s still technically a balanced market,” he said.
Prices aren’t plummeting because many investors have equity in their properties and are trying to be patient. In this market, a sale can take 3.5 to four months, Pasalis said.
“Investors feel it’s terrible because they’re used to their investments selling in a week.”
Thank you Doug.
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