There is much discussion of a Toronto condo “bubble bursting,” but as noted by a Royal Bank of Canada report prepared by economist Robert Hogue released in July 2012, “The historic condominium apartment boom in the Toronto-area market is not necessarily a sign of excess or of a bubble.” Instead, we can expect the market to gradually cool over time due to a number of factors, which are outlined in the report.
We are in fact witnessing a "cooling" period where TREB 2012 fourth quarter report shows a decline of 23 per cent in the number of units sold on the Toronto MLS when comparing the fourth quarter of 2011 to the same time period in 2012. Similarly, the average selling price of a condo is $332,410, which is down 1 per cent compared to the fourth quarter of 2011.
Is this bad news? No. A cooling condo market means affordability, which will allow new buyers to enter the realm of property ownership. For current condo owners a 1 per cent price drop is not significant overall, and owners can opt to rent their unit instead of selling. TREB reports condo rental transactions rose by almost 13 per cent year-over-year in the fourth quarter of 2012, while the number of units listed for rent increased by over 17 per cent. Average rents were up on a year-over-year basis for one-bedroom and two-bedroom apartments.
Another concern is the number of pre-construction condo projects in the works, or slated for launch in the near future. Should buyers be concerned about purchasing pre-construction condos in downtown Toronto? Hogue notes, “Newly built condos are most likely to continue to find occupants in the period ahead. Demand for occupancy in the GTA is strongly supported by demographics.” And Hogue is correct. The Toronto condo market is driven by a large immigrant population and foreign investors who recognize the opportunity to purchase affordable real estate in relation to other major cities such as, Monaco, Hong Kong, Vancouver and New York City. Paired with the fact that single family home prices have soared over the past few years, condo living is an attractive option to students, young professionals, first time buyers, baby boomers and empty nesters. Those who cannot afford to own, will rent – so there will continue to be a strong demand for Toronto’s condos.
A key factor to consider when purchasing a condo is location- this will set your condo apart from others when it comes time to flip your investment or find a tenant. You will want to consider close proximity to transportation, key Toronto districts (i.e. financial or entertainment), shopping, and restaurants.
Purchasing a condo is still a safe investment and wise option. However, buyers need accurate and up-to-date information and guidance from a knowledgeable and professional real estate sales representative.