Toronto homebuyers take cold-blooded approach to the condo market

Toronto’s wobbly condo segment appeared slightly more sturdy in the opening weeks of the fall market as buyers began to turn their attention back to real estate.

Still, uncertainty will surround the troubled slice of the market for some time amid elevated supply and wary buyers.

Downsizers, first-time buyers with help from mom and dad and young professionals with solid incomes are the three groups moving ahead now that prices have declined, says Christopher Bibby, who sold seven condos in the first two weeks of September.

“In some cases, we’re back to 2018 prices,” says the broker with Re/Max Hallmark Bibby Group Realty.

Mr. Bibby says a luxury unit in the Shangri-La Residences sold firm after 18 months on the market. In the St. Lawrence Market area, Mr. Bibby was recently negotiating the sale of a unit after three years on the market with three different agents.

Condo sales in the Greater Toronto Area posted an uneven performance over the summer, with a drop of 11.4 per cent in August from July on a seasonally adjusted basis, estimates Daren King, senior economist with National Bank of Canada.

That decrease follows an 18.5-per-cent jump in July from June, Mr. King adds.

The Next Move: Toronto-area real estate sales pick up, with semis leading the way

On a year-over-year basis, sales of condo apartments dipped 3.4 per cent in Toronto’s 416 area code in August from August, 2024, while the average price edged down 2 per cent to $667,660 in the same period, according to the Toronto Regional Real Estate Board.

In the suburban 905 area code, condo sales fell 7.7 per cent in August from the same month last year. The average price dropped 10.6 per cent to $594,881 in the same period in the 905, TRREB data show.

Mr. Bibby says it is now widely known that condo prices have fallen in the past few years and sellers need to set a realistic asking price, he says.

“There’s really no pushback there.”

Still, buyers are coming in with bids far below asking.

“The opening offers are always a big shock.”

Negotiations tend to be drawn out, he says, with deals at times falling apart, then being revived, then finally coming together.

Mr. Bibby, who has concentrated his business in the high-end condo segment for 20 years or so, says buyers are far more engaged than they were in the past.

“People are thinking things through thoroughly, but they’re also easily spooked or rattled.”

Mr. Bibby says many buyers make their offers conditional on the unit passing a home inspection, which also gives them time to delve into the condo corporation’s status certificate.

That document provides a snapshot of such factors as the reserve fund, common expenses, any litigation and coming major repairs. In some cases, buyers are genuinely cautious, he says, and in others they seem to be casting about for a reason to request a price abatement.

“The conditional periods are getting a little tense. It’s very strategic now – like nothing I’ve ever experienced. The buyers want to feel protected.”

To smooth the process, Mr. Bibby sometimes co-ordinates calls between property managers and buyers who have questions about the status certificate.

As for the sellers, Mr. Bibby says some owners who purchased a condo as an investment or a pied-à-terre are tired of holding onto an asset that is not appreciating.

Some retirees, for example, are listing their property for sale because they spend only a few months a year in Toronto and they don’t want to pay the vacant home tax.

The City of Toronto levies a tax equal to 3 per cent of the Current Value Assessment on residences that are declared, deemed or determined to be vacant for more than six months during the previous year.

“A lot of people are feeling a little discouraged and want to move on.”

Meanwhile, many aspiring buyers have been lingering and waiting for more clarity, says the Bank of Canada’s September meeting of the policy-setting committee, says Anna Wong, real estate agent with Strata.ca.

Toronto preconstruction condos still too pricey for investors: report

Many eyes were on the Bank of Canada’s September interest-rate announcement, she says, as buyers on the sidelines track borrowing costs and prices.

“A lot of buyers are doing the wait-and-see approach,” she says. “They have a down payment. They want to see which way the market is going.”

Ms. Wong points to a listing for a one-bedroom unit in St. Lawrence Market, for example. The apartment with 650 square feet of living space has an asking price of $548,000.

“It’s just not getting activity. It’s a prime location, but buyers are tightening up.”

There are two comparable units in the building listed for a similar price, she says.

So far, all sellers are holding firm, Ms. Wong says, but she likens a strategic move to cut the price to a game of chess.

“Some sellers understand that. They want to be ahead of the game,” she says. “Sometimes you want to be that first person, because if you’re the third, when you finally decide to drop the price, there are no more buyers circling.”

That hesitation from buyers drove new leases 21 per cent higher in Toronto’s core in August from July as people from outside the city move back in and choose to rent.

New projects have been completed, she says, and there’s generally more choice.

“The supply has kept pace, so people are able to find something that works for them,” she says. “Tenants actually have more negotiating power.”

The Next Move: Drop in Toronto home prices ripples across Ontario, encouraging first-time buyers while unnerving sellers

Strata number crunching shows the rent for a one-bedroom apartment with 530 square feet of space, for example, was $2,320 in August compared with $2,400 in the same month last year.

Buyers also have strong leverage, Ms. Wong says, and some are taking advantage of higher inventory in the resale market to purchase at a lower price and with conditions.

In the freehold segment, Ms. Wong recently worked with investors who decided to bid on a two-bedroom bungalow listed with an asking price of $599,000 in the city’s east end.

The asking price was artificially low, she says, adding that similar houses have been fetching $800,000 recently.

The property on a 30- by 100-foot lot drew five offers and sold for $672,000.

Ms. Wong’s clients dropped out of the bidding because they were sticking to a tight budget.

In her opinion, the aggressively low asking price backfired for the seller, and the successful bidder snagged a good deal.

“It was a very cute house,” she says. “This is where the luck comes in for some buyers.”