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The condo market, battered by the flight from the city early in the pandemic, is showing signs of recovery, and that could be a good thing for Canadian housing overall.
In the latest data out yesterday, benchmark condo prices were up 10.6% from the year before – the strongest gain since 2018, says TD economist Rishi Sondhi.
“Though overshadowed by the superheated detached market, condos are quietly making a comeback,” said Sondhi. Benchmark prices have climbed month on month for almost a full year, with the gains in the past three months the strongest since the housing boom in 2017.
“Should condo sales consume a rising share of the market moving forward (as we expect), downward pressure on average home prices from these lower-priced units would be applied,” he said.
Properly, an online real estate brokerage, recently studied how home prices in the Greater Toronto Area have appreciated since that last peak, and found that of all housing types condos have gained the most.
Condo prices in the GTA have climbed 44% since 2017, while semi-detached homes have gained 27% and detached homes 21%, according to Properly.
“This past year, condo sales were hit the hardest by the pandemic. While sales are now back up to pre-pandemic levels, it’s relieving for condo owners to know that their investments have appreciated significantly over time,” said Anshul Ruparell, Properly co-founder and CEO. “Moving forward, it’s forecasted that solid growth in condo sales will continue as pandemic restrictions ease.”
In the first quarter of this year, condo sales in the GTA came within 4% of pre-pandemic sales as attention on the 905 region outside the city core shifted back to downtown Toronto, says Urbanation Inc. in its condo market survey. Condos sold in the city of Toronto itself exceeded sales in the first quarter of 2020.
“The downtown Toronto condo market turned the corner in the first quarter of the year on low borrowing costs and renewed optimism regarding the outlook, but also partly due to chain reaction after suburban home prices soared 30% over the past year and put the spotlight back on urban properties,” said Urbanation president Shaun Hildebrand.
Overall, data show that Canada’s housing market is cooling from the torrid pace set earlier in the year. Home sales in Canada dropped 7.4% in May from April.
Every province saw a drop, the steepest in Manitoba (-10.6%) and the Atlantic provinces (18.5%). Sales slipped 1.6% in Quebec and 7.4% in Ontario.
Nonetheless, sales remain “very strong,” said Sondhi. In fact, May sales were nearly 20% above the highs reached in early 2016, during the peak of the last housing cycle.
Here’s why some cooling might be welcome.
A study by Bloomberg Economics has found that Canada ranks among the world’s frothiest housing markets, topped only by New Zealand.
The higher the reading on Bloomberg’s “bubble rank” the greater the risk of correction, and price ratios for Canada and many countries in the OECD are now higher than they were ahead of the 2008 financial crisis, said Bloomberg.