Toronto condos: a slow resale market and what it means for buyers

Toronto’s condominium market is facing a surplus. A wave of buildings launched in 2020 and 2021, when presales sold quickly and prices were rising, is now being completed, and many early buyers who expected to flip or rent their units have found both options less attractive. The result is a larger number of resale listings and a new willingness among sellers to negotiate.

For people who want to buy a home to live in, this is the most favourable market in years, although it requires careful selection. This article looks at the numbers behind the slowdown and how to buy well in it.

A market short of buyers, not of homes

Resale listings of condos in the city have risen by about a third compared with last year, while sales have fallen. Average days on market for a one-bedroom unit in a downtown building have stretched from three weeks to about seven. Sellers who bought at the peak are often accepting losses to avoid carrying costs, and some investors are being asked to close on presale units worth less than their contract price.

The slowdown in new presale launches has been sharper still. Developers have deferred projects whose financing no longer works, and that will reduce completions in three to four years. Buyers today benefit from the surplus; buyers in 2030 may face a scarcer market.

Where the opportunities are

Older, well-run buildings in Yorkville, The Annex and along the Yonge subway line have held their values better than tall towers in the central business district. Larger two-bedroom and two-bedroom-plus-den units are especially attractive for owner-occupiers because investors favoured smaller floor plans, leaving fewer family-sized units for sale.

Buyers can negotiate more than the asking price. Ask for closing-date flexibility, inclusion of parking or a locker and a reduction in the price based on the building’s reserve fund and upcoming levies. Request the status certificate early; it reveals the condition of the reserve fund and any legal disputes.

• Read the status certificate and the last reserve fund study carefully
• Compare monthly maintenance fees per square foot with similar buildings
• Check how many units are investor-owned and what share are rented short-term
• Confirm whether the building allows short-term rentals, since many ban them

Rents and the investor’s dilemma

Rents for new condos have flattened after several years of growth, as supply increased and international student numbers fell. A typical one-bedroom downtown now rents for about $2,400 a month, which does not cover the carrying costs of many units bought with minimal down payments.

Investors who hold for the long term may still do well, but they need cash buffers and realistic expectations. Selling is easier for those who bought below $700,000; larger units with heavy mortgages face the toughest conditions.

Our advice

Buy for how you will use the space, not for a quick resale. Aim to stay at least five years, because transaction costs, including Ontario land transfer tax and the extra municipal tax in the city, take time to recoup. Have your financing approved before viewing and keep a buffer for maintenance fee increases, which have risen faster than inflation in many buildings.

If you are shopping for a condo in Toronto this autumn, the practical step is to see several buildings before deciding, compare their status certificates side by side and ask your agent for the sales history of the same floor plan. Patience is rewarded in this market, and a purchase made after three or four viewings usually looks better in five years than one made after a single frantic weekend.

Our Toronto team offers a free review of any status certificate before you make an offer, and can introduce you to independent real estate lawyers who handle condo transactions every week.

The figures in this article are illustrative observations from Halvenor’s fictional demonstration desks and are not real market statistics.