Will the drop in Toronto’s downtown condominum prices spread to detached house prices?'

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Nov 28th, 2020 10:47 am

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Nov 25th, 2020 3:26 pm

JD_Inv [OP]: Member; Oct 22, 2019; 301 posts; 275 upvotes

Nov 25th, 2020 3:26 pm

Will the drop in Toronto’s downtown condominum prices spread to detached house prices?'

Saw this article come up on my feed...not buying it at all...

Here is an excerpt from the Toronto star article titled
'If you can’t sell your condo you can’t move up’: Will the drop in Toronto’s downtown condominum prices spread to detached house prices?'

Toronto’s softer condo sales and prices have so far remained at odds with the region’s blazing single-family home market.

Many realtors and economists say the condo sector will regain its momentum once workers return to their downtown jobs and classes, and the stream of immigrants starts flowing again to the Toronto area.

But not everyone buys that.

Investment adviser Hilliard MacBeth, author of, “When the Bubble Bursts: Surviving the Canadian Real Estate Crash,” said the single-family home market will inevitably be affected by the condo sector.

“For almost everybody, if you want to buy a single-family home you’ve got to sell something,” he said. “The problem is, if you can’t sell your condo you can’t move up.”

Full article here: If you cant sell your condo...

34 replies

Nov 25th, 2020 3:48 pm

sandeep8g: Sr. Member; Apr 19, 2017; 921 posts; 748 upvotes

Nov 25th, 2020 3:48 pm

Hopefully.

Nov 25th, 2020 3:52 pm

DaMan12: Sr. Member; Jan 15, 2010; 921 posts; 1022 upvotes; Toronto

Nov 25th, 2020 3:52 pm

The condos aren't unsellable, there are tons of sales happening. They just can't sell the unit for maximum profit. Most of these people bought their condos pre 2017, they gained hundreds of thousands of dollars of equity, even if they missed the peak. If they really want those houses they will take a small haircut. This could have a marginal effect on home prices, but it won't destroy them.

+12

Nov 25th, 2020 4:08 pm

CondoMan98: Deal Addict; Nov 5, 2018; 2700 posts; 4777 upvotes; Toronto

Nov 25th, 2020 4:08 pm

I do not see that happening AT ALL. Every house for sale that I see in mid-town flies off the shelf.

They even have those "Coming Soon" signs to get everyone salivating in advance.

Keep dreaming bears. Those houses at the Beaches will never be half a mill ever again.

Called the bottom.

+6

Nov 25th, 2020 4:12 pm

Cybersid: Sr. Member; Nov 9, 2005; 781 posts; 196 upvotes

Nov 25th, 2020 4:12 pm

Even here in Milton everything is flying, I see listings that last 2 days. Its pretty crazy.

+1

Nov 25th, 2020 4:34 pm

RaC1550: Member; Nov 12, 2019; 311 posts; 485 upvotes

Nov 25th, 2020 4:34 pm

I think one of the reasons that the suburban detached market is so hot is that the new money that would have been spent on a downtown condo has been redirected to the detached market. This combined with the exodus of people who are trying to upgrade from a condo to a detached is making this market.

Given that there is more money in the system, I don't really see what the author is predicting unless we get massive government intervention.

+1

Nov 25th, 2020 6:56 pm

JD_Inv [OP]: Member; Oct 22, 2019; 301 posts; 275 upvotes

Nov 25th, 2020 6:56 pm

RaC1550 wrote: ↑ Given that there is more money in the system, I don't really see what the author is predicting unless we get massive government intervention.

Right...hiking up interest rates

Nov 25th, 2020 9:23 pm

JayLove06: Deal Guru; Feb 29, 2008; 13411 posts; 9328 upvotes

Nov 25th, 2020 9:23 pm

Nope. Condos will again go up in value because the spread is too far. This happened before and it will happen again.

+3

Nov 25th, 2020 9:45 pm

DaveTheDude: Deal Addict; Mar 3, 2018; 1751 posts; 1703 upvotes; GTA

Nov 25th, 2020 9:45 pm

Toronto condo prices are only going to fall further going forward. Down from the February high of $727K to a $665K average selling price in October. November's price decline appears to have accelerated but we will see. With the shift in WFH, Airbnb gone, high employment and massive over building it will be years before prices recover to the pre pandemic highs. I think eventually it will impact detached as condo equity is being lost monthly reducing the pool of detached buyers.

Nov 25th, 2020 10:00 pm

JayLove06: Deal Guru; Feb 29, 2008; 13411 posts; 9328 upvotes

Nov 25th, 2020 10:00 pm

DaveTheDude wrote: ↑ Toronto condo prices are only going to fall further going forward. Down from the February high of $727K to a $665K average selling price in October. November's price decline appears to have accelerated but we will see. With the shift in WFH, Airbnb gone, high employment and massive over building it will be years before prices recover to the pre pandemic highs. I think eventually it will impact detached as condo equity is being lost monthly reducing the pool of detached buyers.

At least you're consistent.

+1

Nov 25th, 2020 10:23 pm

DaveTheDude: Deal Addict; Mar 3, 2018; 1751 posts; 1703 upvotes; GTA

Nov 25th, 2020 10:23 pm

JayLove06 wrote: ↑ At least you're consistent.

I think we both understand that condo prices will eventually recover and surpass their previous highs if just by inflation alone. The difference is you think it will happen in a few months where I think it will take upwards of five years. Thus the problem for condo investors being bag holders for that period while their equity and rental income declines. Likely the reason the price decline is accelerating as many investors are running for the exit.

+1

Nov 25th, 2020 10:47 pm

JD_Inv [OP]: Member; Oct 22, 2019; 301 posts; 275 upvotes

Nov 25th, 2020 10:47 pm

DaveTheDude wrote: ↑ I think we both understand that condo prices will eventually recover and surpass their previous highs if just by inflation alone. The difference is you think it will happen in a few months where I think it will take upwards of five years. Thus the problem for condo investors being bag holders for that period while their equity and rental income declines. Likely the reason the price decline is accelerating as many investors are running for the exit.

5 yrs is a stretch....

Nov 25th, 2020 11:09 pm

DaveTheDude: Deal Addict; Mar 3, 2018; 1751 posts; 1703 upvotes; GTA

Nov 25th, 2020 11:09 pm

JD_Inv wrote: ↑ 5 yrs is a stretch....

Not really as it took from 1989 to 2007 or 18 years for Toronto condos to recover to their previous 1989 highs after the last crash caused by similar high employment and over building. Even if you believe this time it will be different it doesn't look promising for a quick recovery.

Nov 25th, 2020 11:27 pm

JD_Inv [OP]: Member; Oct 22, 2019; 301 posts; 275 upvotes

Nov 25th, 2020 11:27 pm

DaveTheDude wrote: ↑ Not really as it took from 1989 to 2007 or 18 years for Toronto condos to recover to their previous 1989 highs after the last crash caused by similar high employment. Even if you believe this time it will be different it doesn't look promising for a quick recovery.

I don't see it getting as bad as the crash in the late 80s, the whole real estate market crashed back then not just condos. Interest rates were quite high back then as well, now we have record low interest rates, hence I don't think things will get that bad. Real estate plays such a huge role in Ontario GDP and is a noticeable portion of Canada's overall GDP. Who knows when Comodities like oil will come back, hence real estate will keep things afloat.

+1

Nov 25th, 2020 11:36 pm

DaveTheDude: Deal Addict; Mar 3, 2018; 1751 posts; 1703 upvotes; GTA

Nov 25th, 2020 11:36 pm

JD_Inv wrote: ↑ I don't see it getting as bad as the crash in the late 80s, the whole real estate market crashed back then not just condos. Interest rates were quite high back then as well, now we have record low interest rates, hence I don't think things will get that bad. Real estate plays such a huge role in Ontario GDP and is a noticeable portion of Canada's overall GDP. Who knows when Comodities like oil will come back, hence real estate will keep things afloat.

I agree it likely won't get as bad as 1989 where Toronto downtown condo prices dropped 50%. But with interest rates pretty much as low as they can go there is little left to jump start real estate. It was actually interest rates declining from 13% to 3% that allowed a RE boom after 2000. The funny thing is it actually took a greater % of average income to buy a house in 1989 then today because of those high rates.

+1

Nov 25th, 2020 11:45 pm

RaC1550: Member; Nov 12, 2019; 311 posts; 485 upvotes

Nov 25th, 2020 11:45 pm

DaveTheDude wrote: ↑ I agree it likely won't get as bad as 1989 where Toronto downtown condo prices dropped 50%. But with interest rates pretty much as low as they can go there is little left to jump start real estate. It was actually interest rates declining from 13% to 3% that allowed a RE boom after 2000. The funny thing is it actually took a greater % of average income to buy a house in 1989 then today because of those high rates.

Yes, most of the initial pump from interest rate decline has been used up. Without further stimulus, the detached market will probably start to stabilize soon. Given that it's almost impossible to find any cash flow positive properties in Ontario (due to a combination of price increase and rent declines), investor interest will probably diminish.

+1

Nov 25th, 2020 11:49 pm

JD_Inv [OP]: Member; Oct 22, 2019; 301 posts; 275 upvotes

Nov 25th, 2020 11:49 pm

DaveTheDude wrote: ↑ I agree it likely won't get as bad as 1989 where Toronto downtown condo prices dropped 50%. But with interest rates pretty much as low as they can go there is little left to jump start real estate. It was actually interest rates declining from 13% to 3% that allowed a RE boom after 2000. The funny thing is it actually took a greater % of average income to buy a house in 1989 then today because of those high rates.

Also, between 1990 and 2008, Ontario alone added almost 6 million people to its population. This also contributed to the 20 yr bull run for the Toronto market.

+1

Nov 26th, 2020 8:16 am

MotoCross817: Member; Jul 7, 2019; 448 posts; 356 upvotes

Nov 26th, 2020 8:16 am

DaveTheDude wrote: ↑ I agree it likely won't get as bad as 1989 where Toronto downtown condo prices dropped 50%. But with interest rates pretty much as low as they can go there is little left to jump start real estate. It was actually interest rates declining from 13% to 3% that allowed a RE boom after 2000. The funny thing is it actually took a greater % of average income to buy a house in 1989 then today because of those high rates.

Are you serious?
Are you forgetting that we're in a pandemic, and many of the transient (and full-time) employment from bars/restaurants/offices have been drastically reduced in the city. All of the daily/weekly events like festivals, CNE, ACC and Rogers sports and concert events have all been shut down. No international students or global conferences for international workers. All leading to less demand for rent, and thus condo prices.

Interest rates are only one of many factors in condo demand.

+3

Nov 26th, 2020 8:55 am

DaveTheDude: Deal Addict; Mar 3, 2018; 1751 posts; 1703 upvotes; GTA

Nov 26th, 2020 8:55 am

MotoCross817 wrote: ↑ Are you serious?
Are you forgetting that we're in a pandemic, and many of the transient (and full-time) employment from bars/restaurants/offices have been drastically reduced in the city. All of the daily/weekly events like festivals, CNE, ACC and Rogers sports and concert events have all been shut down. No international students or global conferences for international workers. All leading to less demand for rent, and thus condo prices.

Interest rates are only one of many factors in condo demand.

The factors you mention will help stop the bleeding but won't restore prices to previous highs any time soon. You still have no employment for those international workers, WFH even if many return, Airbnb basically dead, failed businesses, and interest rates eventually rising.

Nov 27th, 2020 9:28 pm

Redsanta: Deal Addict; Dec 16, 2015; 2374 posts; 2005 upvotes; Canada

Nov 27th, 2020 9:28 pm

DaveTheDude wrote: ↑ The factors you mention will help stop the bleeding but won't restore prices to previous highs any time soon. You still have no employment for those international workers, WFH even if many return, Airbnb basically dead, failed businesses, and interest rates eventually rising.

There will be a shift back to downtown and far suburb houses will crash as employers requires their employees back in office, at least 3 days a week. I would worry about people not thinking long term and buying in the suburb at the peak now.

Just like stock market rotations.

Also downtown toronto is the core employment centers with big multinational companies, banks, worldclass hospitals, universities, and etc. Those tech workers might not be back, but other white collars will. Millions of new rich immigrants and international students are coming to Toronto, too.

Airbnbs will shift to longer than 1 month rentals and big businesses are not failing. Once people comes back to downtown, hospitality business recovery will be swift.

Again, just like stock rotation.

If condos are securitized, it will be like sp500 and russells springing back to all time highs due to the vaccine and back to normalcy. Mean reversion.

To the moon

+3

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