Has there been a larger topic of conversation within Toronto’s condo market?
The “Toronto Condo Bubble”.
I started in real estate in 2007, a “Toronto Condo Bubble” has been the presumed outcome at every step of the way. Without fail, whether the media was writing about it, buyers were talking about it, owners thinking they should sell before a projected collapse in value. But will the bubble burst? Well, it turns out that the condo bubble didn’t exist…let alone burst!
In this time period, Toronto has seen an incredible amount of condo value growth.
The primary driving factors behind the condo boom in Toronto have been:
- Lack of condo supply
- Toronto’s workforce wants to live downtown so that the commute isn’t cumbersome and amenities are easily accessed. Density is permitted in the downtown core unlike most of the surrounding neighbourhoods in Toronto
- Money has been cheap, not exactly growing on trees, however, interest rates have allowed for more financial flexibility for Toronto buyers. The cost benefits (and investment) of ownership have outweighed the rental option for much of the last decade.
There is little doubt that the Toronto condo market has slowed, but wait, it’s only a small amount, in the recent month. Yes, a month….not an entire year! And when I say “slowed”, it is a levelling off, not a drop in values. This should signify that the bubble (if there even is one!) isn’t quite ready to burst just yet.
The previous 12 months have seen condos selling in multiple offers, seemingly in the blink of an eye. The reason being? Condos are now the entry level home purchase option for Torontonians. 6 years ago a Toronto buyer could purchase a house for $600K…now that same house is over a million dollars to acquire. Incomes didn’t increase at a corresponding rate. So, there is no choice but to purchase a condo if one cannot currently afford a house in the city.
Let me go back to the previous point of a one month slow down in the Toronto condo market. This is, in all likelihood, due to buyer fatigue. The previous 12 months have been so frothy and difficult to acquire a condo that buyers are taking a collective breath as they step back for the summertime. Historically speaking the Toronto summer real estate market is quieter, this year isn’t any different.
Is there a Toronto condo bubble? No. You can see cranes everywhere you turn in the city! So wouldn’t that mean that there are too many? No. The reason all there are so many condos being built in the city is because Toronto requires them. We do not have enough housing for our population. There are over 200,000 people moving to Toronto each year. They need somewhere to live. Also, keep in mind that the financing requirements for developers are that they sell more than 3/4 of the units prior to putting a shovel in the ground. So these units are being gobbled up. These developments that have begun construction have been in the pipeline for more than 3 years.
I didn’t even touch on the rental aspect. We need more condos to that people have places to rent. This will drive an aspect of the condo development growth. I will leave this for another day.
