What's Really Going On In The Condo Market?
Wednesday Mar 09th, 2022
Condo sales have been exploding - and it's not going to stop anytime soon.
At the beginning of COVID, the Condo market saw a huge spike in listings but there wasn't much demand. So prices decreased a bit. But by the 2nd half of 2020, throughout 2021 and now in 2022, there's a huge resurgence in buyers wanting to purchase condos. As freehold homes became unaffordable (due to the lack of inventory and huge buyer interest), condos became the first step into the real estate market. Now there's such high condo demand and not enough for sale, that the prices are continuing to rise. It's a dramatic reversal of the early part of the pandemic when condo prices flattened and the number of available units spiked as investor-owners needed to sell what they couldn't rent out.
A little statistical history: Condo prices in Q4 of 2021 surged sky high in some of the tightest market conditions we've seen in 20 years. The average condo sales price rose 16.4 percent year over year to $710,087. During that time 7,815 condos sold which was 21% higher than the 6,462 transactions in 2020. And a shortage of supply meant tough competition among buyers that pushed up prices as new listings fell 29% annually and active listings tumbled by 65%.
Making up this large buyer demand is the 'first time buyer'. They waited to purchase, through the first part of the pandemic, but re-entered the market with a huge passion lin 2021. It's the norm, now, to have offer dates on condos with 5-15 (or more) interested buyers competing. And since there can only be one successful buyer, there's always a huge wait list for the next available condo. This is going on all over the city. Our current market condo inventory is so squeezed, that within a week or 2 of one condo selling, I've even seen the next comparable unit, in the same building, sell for tens of thousands more!
Pre-construction condo sales are huge as well - and the price per square foot has increased dramatically to satisfy all the buyers wanting to purchase. Not only are first time buyers snapping up condos that won't be built for 3-5 years, many homeowners want to downsize and are willing to wait for their 'new' homes to be ready.
Whether a condo or a freehold home, the Catch 22 is: if a Seller needs to buy another home to live in, and there isn't enough on the market for them to do that, how can they list their home for sale? Lack of inventory, with high buyer demand = rising prices. As well, condo owners, who can't currently afford a house, are not selling or moving.
The condo shortage is also affecting renters, pushing condo lease prices higher and suppressing vacancy rates. One bedroom units have increased 13.7% to $2,099/month and 2 bedrooms units have gone up 12.6% to $2,763/month. After a short pandemic induced blip in rental supply, available condo rentals have declined, making it more difficult for renters to find a place to live.
The pricing forecast? Continuing double digit growth because of a lack of inventory. Hopefully, as we move into the spring & summer months, there will be more condos available to satisfy the demand and the sales prices will start to balance out. Fingers crossed.