Planning on selling your downtown Toronto condo? Here are some information you could use to receive higher return on your investment.
If you have a condo in downtown Toronto, there’s a good chance you’ve been wondering if now is the time to sell.
According to recent headlines, the market is red-hot. But some commentators say it’s cooling, or that it’s set to cool. Condo developers just had one of their busiest months ever, but how will this impact demand?
Many of the condo owners I work with are confused, and I don’t blame them. Keeping up with developments in Toronto’s housing market has been especially challenging recently.
Here, I’ll provide some information to help you decide whether to sell your downtown Toronto condo. I’ll explain some of the major factors at play—and what they mean for you.
How hot is the condo market?
In March of 2017, Toronto’s benchmark condo price shot up by an unprecedented 30 per cent. Will we see this level of growth again anytime soon? An uptick in condo prices has many investors wondering.
Of course, recent condo price increases haven’t reached the soaring heights that we saw last year. But for condo sellers, it’s been a good first quarter. They have been able to take advantage of low inventory and multiple offer scenarios.
Numbers from the Toronto Real Estate Board (TREB) reveal that this January, the benchmark condo price hit an all time high of $492,800. And in January, February, and March, condo prices were up significantly year-over-year.
Clearly, the demand for condos is very much alive. In fact, around 60,000 units are currently under construction in the GTA and set to be released over the next 3 years. This is happening at a time when the single-family housing market is slow and the rental market is tight. Put simply, people have been priced out of buying houses and have turned to condos, or they still see buying and renting condos a good investment.
Still, these recent shifts may be bringing up new questions. Will recent trends continue, or is it time to cash out now? The answer isn’t straightforward, but one thing is certain. Now is the time to consider the factors at play and come up with a game plan.
A complex picture for investors
First off, condo owners have seen massive gains recently. An analysis looking at Toronto units that were completed last year reveals just how much the market has boomed.
According to Urbanation and CIBC, the resale prices for these units was up 51% on average from their presale prices. A significant boost to property values, to say the least.
Of course, the full picture is more complex. Due to rising interest rates, many investors who are renting out their units aren’t making enough money to cover their mortgages and condo fees. The result is negative cash flow.
What about new investors? Urbanation has found that those who purchase a typical pre-construction condo today and take possession of it in 2021 will need to raise their rents by 17% to make money.
If you’re already renting out an investment condo, last year’s rent control expansion is an important consideration. If you continue renting, you may not be able to increase the amount that you charge until your current tenant decides to move out. There is an increasing number of landlords who are paying 1 months rent to the tenants and asking them to move out so they can move into the unit themselves simply because they can not keep up with their increasing monthly payments.
Of course, none of this changes the fact that recent returns on condo investments have been high. But it does mean that many investors are thinking long and hard about whether to hold on to those investments.
Sell, or hold on?
So, should you hold onto your condo, or is now the time to sell? The answer will depend on your expectations.
Shifts in the single-family housing and rental markets have had a strong impact on investor mind set. Recent conditions have made renting or buying a condo the best choice for a lot of people who would have explored other options in the past. In other words: the market has been booming, and investor expectations have been shaped by the boom. But as prices balance out across Toronto’s real estate markets, things will change—to some extent.
We are headed more towards a healthy and balanced condo market. So if you’re thinking long term (by which I mean five years or longer), you might want to consider keeping your unit.
Condos, especially those priced under $600,000, will retain their value. But if you have a typical unit, lower level or a floorplan that is difficult to work around, it may not stir up multiple offers or bidding wars a year from now.
There’s some more good news for those of you who choose not to sell. Sellers won’t be flooding the market. Even if every investor who’s in negative cash flow sold their condo right now, their units would only make up 3.4% of overall supply.
What about investors who should sell? You might fall into this camp if you’re expecting prices to shoot up again soon. At this point, you shouldn’t be waiting for a 20%+ year-over-year price increase. If you are, it might be time to seriously weigh your options.
One thing is clear. If you’ve been debating whether to sell your downtown Toronto condo, you need a game plan. And it should probably start with an assessment of your own expectations—and how they line up with current market conditions.
Still wondering whether to buy or sell your condo? Let’s discuss it! Call or shoot me a text at 416-500-5360, or email me at email@example.com.