The big news is that September sales on TRREB, at just over 11,000 units, was a record for the month. It was also 42% higher than for September 2019. As we previously reported, these numbers represent a strong Spring market (usually April, May, June). The reality is that year-to- date sales in 2020 are now equal to those of 2019. That’s a good thing when we look back at how we performed in April.
But this market continues to go in two opposite directions. The low-rise market is hot, and the farther out of Toronto you go, the hotter it becomes (because prices are lower). The condo market is cold. It started with rentals and a lack of demand from tenants. International students stayed away, corporate transfers disappeared, and then young people moved back home. We first pointed out the problem in April. Then, for investors who could not afford to carry their units with no or negative rents each month, they then resorted to the resale market. It started in August, but we forecast that trend back in June. It’s surprising how many people are late to the party.
Why are condos out of favour? People don’t have to be close to work, there is no entertainment or sports, and now you cannot even eat indoors as the winter approaches. Condo prices are off by at least 5% – heading to 10%. I can tell you that there are lots of buyers – investors and end users, waiting for the shake out and our best guess, is that these buyers will enter the market, starting in January. People don’t change their lifestyle over night, and when downtown living returns to some form of normalcy, they will return too. Here are the numbers:
SEPTEMBER CONDO SALES AND NEW LISTINGS
With condos, there is also a buyer preference for cheaper prices over location with COVID-19. *Downtown includes Humber Bay Shores
source: Toronto Real Estate Board
Historically, October has usually been a bigger sales month than September. In 2019, the increase from September was 8% on TRREB. This year, we are already seeing a slow down in sales and we forecast sales in October to be 9,000 units – up 7% from 2019 but down 20% from September of 2020.
The hardest hit market continues to be downtown condos. While sales for September were up 11% over September of last year (vs. 42% for TRREB), we expect that sales for October will also be down by 20%. At the same time ‘active’ listings are up another 6% from the end of September which will further weaken prices.
The market downturn can be explained primarily by the fact that the last three months were really a late spring of April, May, and June sale numbers. The second factor is that a second wave of COVID-19 cases is making some people more hesitant to venture outside.
This chart compares the market from September 2019 to September this year. Despite the global pandemic, numbers this year for both TRREB and Downtown Condos have gone up. However, it is forecasted that the numbers for October 2020 will be lower.
source: Toronto Real Estate Board
Yes, there are still people living Downtown and they appear to be renters. In September of this year, 2,320 condos were leased. That was 75% HIGHER than a year ago. With COVID-19 driving down rents, it was apparent that tenants were shopping for cheaper properties and they found them! We have prepared a table that shows average/median rents by condo type, and with and without parking.
DOWNTOWN CONDO RENTS IN SEPTEMBER 2020