Toronto

Toronto Condo Prices Drop, But Buyers Are Paying “Over Ask”

Toronto condo prices are falling, according to the country’s biggest real estate board. Though people are bidding over ask, and inventory is tightening, paradoxically. That’s what the Toronto Regional Real Estate Board (TRREB) data shows for July. The mix of indicators all adds up to a balanced market, but the picture of where it’s heading isn’t so clear

Greater Toronto Condo Apartment Prices Fell $3,200 Last Month

Greater Toronto condo apartment slipped a little lower. TRREB reported the benchmark condo apartment price fell to $639,400 in July, down 0.5% ($3,200). Compared to last year, the price of a condo apartment is 8.1% ($48,129) higher. Still a heck of a gain on an annual basis, but the monthly drop took a big honkin’ chunk of profits with it.

Greater Toronto Condo Benchmark Price

The price of a “typical” condo apartment across Greater Toronto.

Source: TRREB; Better Dwelling.

Price growth is slowing across the region, as the annual rate of gain tapers. Last month’s annual growth of 8.1% was much smaller than the 9.0% ($53,275) seen in June. Growth only recently began accelerating, lagging the rest of the market. It’s interesting to see it already begin to roll back.

Greater Toronto Condo Benchmark Price Change

The annual percent change of TRREB’s benchmark price for a condo apartment.

Source: TRREB; Better Dwelling.

Don’t read that incorrectly. The gains are still exceptionally large. Whether it would have been profitable for an investor is another story. At current rental rates, with all costs associated, many of these units would be negative cap. That is, they would cost more than the actual rent collected from a tenant.

Condo Prices In The City of Toronto Are Falling Even Faster

In the City of Toronto, the trend was amplified even further. The benchmark condo price fell to $659,600 in July, down 0.6% ($4,100) from the month before. Compared to the same month last year, prices are 6.45% ($39,966) higher. The decline was over 10% of what’s left of the annual change in price.

That said, it shouldn’t surprise anyone to see that led to a tapering of growth. Annual growth was 7.4% ($45,730) in June, so the rate has dropped a full point in a month. Smaller prices tend to destroy FOMO, leading to less urgency to buy. This can become a self-reinforcing feedback loop, slowing the market further. Worth watching out for!

Condo Prices Are Falling, But Buyers Are Paying “Over Ask”

Anecdotal evidence to support a “hot” condo market is supported by data, it just doesn’t mean much. The average condo apartment sold for 101% of its asking price — true across TRREB and in the City breakdown. Half of Toronto condo apartments also sold over the asking price. Though the benchmark still fell, despite the exuberance demonstrated by condo buyers. 

Toronto Condo Inventory Is Balanced But Tightening

Part of this would have to do with absorption, which is surprisingly healthy. The TREBB sales to new listings ratio (SNLR) for condo apartments hit 62.2% in July, up almost 3 points from a month before. When the SNLR rises above 60%, the market transitions from a balanced to seller’s market. That’s when prices are expected to rise, but it needs to stick in that range for a few months.

In the City of Toronto, the ratio was just a little lower — still in balanced territory. The ratio increased to 59.1% in July, rising almost 2 points over the same period. A balanced market is one where it’s considered priced right, but it’s all relative. When you’ve been in a hot market for years, a balanced one can feel cold and lead to prices sliding a little lower.

Toronto condo buyers are exuberant and willing to pay more than sellers are asking for. But that appears to be entirely due to them thinking the market is hotter than it is. A healthy supply inflow is reaching buyers, which hasn’t happened in a long time. Price growth is also moderating, with units selling cheaper than a month before. For some reason, many people are paying over the list price.

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8 Comments

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  • Reply
    Robert 4 months ago

    $3k – you call it price decrease? :)))
    It can be considered as rounding difference (either way) just because different months different type of units are sold (composition changes) so there are natural fluctuations.

    • Reply
      Peter Drunken 4 months ago

      It’s 10% of the gain, for the first month against higher demand. At half that velocity you’re looking at prices going negative in 5-6 months for a place half o investors are already negative cap by $12k per year. Ignorance is bliss.

  • Reply
    Jamie 4 months ago

    Two things can be true at once, it depends on the narrative buyers are listening to. Everyone I know looking for a house thinks prices are going to rise a million percent every month, and it’s their path to financial freedom.

    Meanwhile, people selling property arent’ in a rush to get rid of their places, and are trying to enjoy the summer before selling. Even in a cold market, property in Toronto will always sell, it just takes longer. Enjoy the summer. Can always buy a place after the lockdowns are back in the fall.

  • Reply
    GTA Landord 4 months ago

    Condos were negative cap before the pandemic. Imagine where they are now.

    • Reply
      Ben 4 months ago

      Maintenance fees have also been declining since the pandemic, since insurance rates are lower when everyone is home (less fire damage ,etc). I don’t expect that to be the normal once things reopen again.

      • Reply
        Paul 4 months ago

        Ah nope. Insurance premiums are on the rise. Expect the trend to continue.

  • Reply
    Dar Robbins 4 months ago

    No Duh.
    BoC wont stop buying MBS fromCMHC.
    They even told us that they will put a floor on RE prices.

  • Reply
    flipg 4 months ago

    The Great Thing about a Debt Based Economy like Canada’s: it can crash anytime.

    Then the Bankers can utillize Gates Patent # 060606 (“”Cryptocurrency system using body activity data”) microchip in some kind of collar; throw debtors into holes armed with picks and shovels; and previously nonproductive energy can be harnessed and translated into crypto tokens for their creditors.

    I fully expect indentured servitude to be back in vogue by 2030. Those high rollers with a pocket full of Vancouver and Toronto mortgages will be first in line at the Gulag.

    History has important lessons.

    Wakeup and smell the Brimstone.

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