The coronavirus pandemic has impacted the country in several ways, especially the real estate market. Yet, the good news is the industry was quickly able to adapt to virus conditions by relying on technology solutions like virtual open houses and e-signatures to facilitate transactions. As a result of this quick pivot, homebuying and selling persists (safely) despite the virus.
When various market conditions occur, many people want to size up their investments to determine if there is an opportunity to explore. The coronavirus pandemic has left many wondering if now is the time to dip their toes into the condo market, and if this type of property is a wise investment to make during these uncertain times.
While the condo market is most vulnerable to the COVID-19 headwinds, there’s no telling if a nosedive will occur. The truth is, depending on where you look in the country, the condo market may be facing challenges, but it is mainly the big-city condo segment that is hurting the most and albeit, likely only in the short-term.
There is an upside to these market challenges that can eventually allow investors to realize profit, if they’re willing to take on some calculated risk.
Below, we dive into current Canadian condo market trends, to help hopeful investors make an informed decision:
Condo Sales Canada-Wide
Across the country, condo submarkets have experienced varying levels of cooling.
In Canada’s largest condo market, Toronto there has been a significant decline in condo sales. In fact, condo sales fell 8.5 per cent in October compared to the same month last year. Yet, in the suburbs of Toronto, condo sales in October increased 28 per cent compared to last year and prices rose almost 7 per cent.
Condo listings are spiking in markets like Toronto, Vancouver, and Montreal; an inverse trend from what we’ve seen over the past few years.
These popular markets have long attracted people to city-living – even causing people to compromise on space in order to live near attractive amenities.
Shifting lifestyle preferences
Being cooped up at home during the COVID-19 lockdown, while converting home space into a remote working environment, a school for children, and a fitness studio, has sparked desire for more spacious floorplans with additional greenspace.
Another reason urban living may have lost its appeal is due to the closure of amenities like restaurants, bars, gyms, movie theaters, galleries, and museums during the virus outbreak peaks.
This is pushing many homebuyers away from the urban condo market segment, and towards detached and semi-detached properties in suburban and rural communities.
Other factors Impacting Condo Sales in Canada
Meanwhile, immigration has been put on hold due to border closures which has also affected the condo market sales, since immigrants often fuel the demand for condos in urban areas. Another factor to consider is that post-secondary school students have also been completing courses remotely, which decreases demand for condo apartment style residences in the urban core for students during this time.
Canadian Condo Prices
In tighter downtown condo submarkets like Toronto, a dramatic increase in condo supply is evident. Unsold condo units are sitting vacant across the city, and Toronto condo market prices and rents are expected to continue to decline in the months ahead. Since the coronavirus reared its head in March, sales price growth in the condo segment has trailed behind the housing segment.
Across Canada, in the first quarter of 2020, condo price increases were outpacing single detached houses. According to Robert Hogue, Chief Economist at RBC, new condo prices in the Toronto metropolitan area were up 14.6 per cent over the previous year while resale prices had increased by 8.5 per cent. In Montreal, new condo prices were 9.8 per cent and resale prices were 8.2 per cent, respectively. Ottawa followed the same trajectory, with new condo prices up 22.6 per cent year-over-year, while resale prices had increased by 15 per cent.
Current data shows a different story; while condo prices are up year over year – month over month, price growth is not as strong.
Why Condos are Still a Good Investment Today
Value will increase over time
Although the condo market is weaker during this time, this doesn’t mean it won’t rebound. Market observers are projecting that it is unlikely that people will stay away from condos for the long term; the shifting preference from urban to suburban has been modest at best. When immigration restrictions loosen, people return to offices, and amenities reopen indefinitely – buyers will flock to the city once again to enjoy the metropolitan lifestyle and conveniences that urban condo-living has to offer.
The condo market could quickly rebound in the years following the pandemic, based on the strong sales activity and prices just prior to the virus taking hold. Investors can take advantage of lower condo prices now, to buy and hold a unit to sell once the market strengthens. Decreased condo demand in expensive submarkets, means buyers can scoop up condos for lower prices, yet reap the benefits when demand returns.
Low Interest Rates
As a result of the pandemic, the Bank of Canada lowered their interest rate to 0.25 per cent in order to bolster the economy. This is the lowest the rate has ever been. For those who were facing challenges qualifying or securing a mortgage before, the lowered rate can be viewed as great news, enabling hopeful investors to borrow more money at a lower rate. Whether it’s choosing a condo in a better neighborhood or with more amenities, this can allow condo buyers and investors to get more of what they desire.
Across the country, various condo submarkets are reacting to coronavirus conditions differently. While demand for urban condos may be decreasing, suburban condo markets seem to be experiencing increased activity. Although, it’s important to keep in mind that when society is back to normal, previous trends may return. For now, homebuyers can scoop up a condo at a reduced price and potentially realize profits from their investment when the market strengthens once again.