More than 2,800 condos were available for purchase or rent last month in Toronto, but failed to move to closing. It’s a sign, say some analysts, that buyers are speculating more on condos as a solid investment option.
“The rental market is still very strong and nothing alarming has happened yet, however certain pockets within the city still have a lot of inventory, such as the Bathurst and Lakeshore area and the area where the Pan Am residents are based on River St.,” said Kenny Wong, an agent and condo manager in Toronto, adding he expects more vacancies after the Pan Am Games wraps up in August.
The older units tend to have much more favorable pricing for first-time buyers but it’s the newer units that are presenting challenges.
“The prices are getting so high considering additional closing costs and HST that I am not sure how the buyers will be able to make money,” added Wong.
His comments follow the publication of a National Bank Financial report, which used information from the Canada Mortgage and Housing Corporation and the Toronto Real Estate Board to highlight a record number of vacancies for the month of May; however, economists have been careful not to read too much into the rise.
“To be sure, the situation deserves monitoring, but one month does not make a trend,” said Marc Pinsonneault, an economist at National Bank, adding that numbers from Realnet Canada showed that the number of unsold condos have been trending down since the second half of 2014.
However, concern remains a strong factor for agents and something that is deterring first-time millennial homebuyers from entering the market.
With houses out of reach for many, and the threat of leaving money on the table with condos, more are turning to renting, a move that is affecting agents but is also one welcomed by a firm focused on providing millennials with investment advice.
“You can’t put all your eggs in one basket, especially if you’re trying to invest short-term to lead to a larger transaction,” said David Nugent, CIO and COO or WealthSimple.
“There are more hurdles for condo investment than ever before so you have to be prepared for the realities.”