This was supposed to be the year. The nosedive year. The condo apocalypse. The crash all the naysayers have been dying for. But why 2014? Well this is the year that we will have the most new condos coming to the housing market, more than we ever had before in the city of Toronto. And that doesn't even count the resale condos. With this incredible number of condo units hitting the market, this is the year where we are supposed to witness a flooding of the market with new condos that will throw off the balance between buyers and sellers, sending prices on a downward spiral. "Yay!" you would cheer if you you've been waiting for years for this event so you can swoop in and buy a cheap condo after the smoke has cleared. "Oh God, no!" you may blurt out if you are a recent buyer or soon-to-be seller. Your timing could not be worse.
But the truth is, it's likely not happening. Though three quarters of the year lies ahead of us and anything can happen, I'm not seeing a crash building up. In fact, I'm seeing something fairly balanced taking hold.
So what happened? Why no crash? Well, here are my thoughts on the crashless Toronto condo market of 2014, and why it's not taking place:
1. The Housing Market is Nuts. I've said it before and I'll say it again. There is a limited supply of houses in this city. It is like the housing market and the condo market are not related at all, even though they are in the same city. Concerns over oversupply are big on the condo side of the properties for sale in Toronto with very few bidding wars. On the freehold/house side of things, we see limited supply of houses for sale and a lot of bidding wars for the ones that are. Though these two Toronto property markets have been functioning differently, one still does affect the other. I'm witnessing many exhausted or priced-out house buyers beginning to turn their attention to buying a condo, and in turn, adding more buyers to the condo market. In this market, one can more easily find something in the price range and not have to compete nearly as much.
2. The Condo Market Has Been Tame For Many Years.The key to the past few years was to buy or sell a condo in the right building in the right neighbourhood. Some condos have slipped in value over the past three years, some have risen in value, and some have stayed the same. My point: Prices have not been rising uncontrollably in the condo sector. In fact, it's been relatively flat. If there is a condo bubble, the air has been let out of the bubble just a little bit already.
3. Interest Rates Are Low. And by low, I mean low. Nothing gets buyers out more than a low interest rate, especially when they are seeing 5 year fixed rates just below 3%. Rates are about as good as they get right now making it a pretty good time to buy from a mortgage point of view.
4. Most Condo Sellers are Not Desperate. We are not seeing a lot of distressed sales where condo owners are forced to sell because of their financing. Instead, we see investors holding on to their condos and renting them out. Since rents are pretty good in this city and condos take up a lot of the rental demand , some investors are holding on to their investments.
5. Condo Appeal. Demographically, condos appeal to two big and bulging groups in this day and age. Namely, the downsizing baby boomers, who are selling their homes for smaller and easier living, and the echo generation, the boomers’ kids who often look to condos as their first buy and a way to build equity. Of course, there are others. Most importantly, those buyers who just want to live close to the neighbourhoods they love in a downtown environment or an established neighbourhood without the hassle of a yard or fixing up a house. They want to be able to lock and leave when they go on vacation.
So, for all of those waiting for the crash so they can swoop in and buy up condos, sadly I don't think 2014 is your year. I cannot say what the future holds in the years to come, but for now the condo forecast looks calm and steady.