For the past three years, the Toronto condo market has been quite predictable, maybe even a little boring. It is not like the often competitive, battle-heavy housing market where prices have shot up each year due to low inventory and high demand. Condos have had humble results in the past three years. In many neighbourhoods and buildings, there have been modest price increases. While in others, there have been slight declines. Overall, particularly in the past year, the condo market has shown some respectable price gains.
But something new is starting to take shape here in the Toronto condo market that will change, and complicate, how the condo market functions. It's true that when you buy a condo, you need to be very aware of the neighbourhood in which you are buying and the health and appeal of the building to have the best return on your investment. That will not change. What will change, in terms of an increase in value, has to do with the size of your condo unit. Bigger can be better. And when I say bigger, I'm not talking about a few hundred square feet here and there. I'm talking about the big condos, the ones that are large two to three bedroom units, a house alternative if you will. They may soon become the condo with the best return on your investment.
But why is that? It was not long ago that Toronto developers avoided building too many large condos, particularly three bedroom condos, because they had a hard time selling them. The demand was for smaller condos, not the big ones. In cities like New York, the practice of the developers was different. They did build larger condos because the people of New York are much more accustomed to living in apartment buildings for their entire lives. In Toronto, it is still mostly a new phenomenon from the past few decades. So, compared to some large cities, Toronto did not build very many big condos because the demand was not there.
But something has changed. There is an increase for the demand of larger condos in Toronto, more than ever before. To understand this, you need to look at how houses are selling in this city. Many first time buyers have become wary of the bidding wars for houses and are now looking for house alternatives. They can live closer to downtown, and they don't have to compete for a condo unit as much as they do for a house. They have consistent maintenance fees, and do not require a large renovation budget. Plus, they don't have to commute from far away if they work downtown.
Also, we have the boomers changing everything again. As they downsize from their larger homes, they are looking to be in the city, close to restaurants, their kids (if they have any), and they don't have to mow the lawn or shovel the snow. Plus, if they want to take off to Florida or Spain for four months, they can lock and leave their condo and go. As a group, they have the money for, and the desire for, larger spaces, and will not settle for less. Many have not grown up in an era where they had to live in a tiny bachelor apartment for a portion of their adult life. Real estate offered decent space at an affordable price in their lifetimes for the most part.
Condos may not be for everyone, but there is a growing demand for the big condo. And since developers have not built very many in Toronto's most recent construction boom, we have a classic case of low inventory and high demand in the making. In my opinion, this will likely lead to above average price appreciation on these bigger condo units down the road.