High inventory effecting condo prices

by Neil Sharma on 23 Oct 2017
Condo prices in Toronto have slowed down for a fourth straight month, according to numbers released by the Canadian Real Estate Association (CREA).

While prices remain high, they’re not growing because of a rise in inventory. Since May 2017’s 29.13% year-over-year price increase, growth hasn’t been as strong. According to Renu Asdhir, real estate agent with iPro Realty Ltd., downtown condos were receiving multiple offers, but with the injection of inventory into the market, it’s become a buyer’s market.

“The market has been really going up the last two years,” she said. “We have a lot of foreign investors, people coming from China and India, and a lot of students coming, so they were buying for their kids. We were seeing a lot of multiple offers on condos and prices were going up. What happened all of a sudden is there are a lot of projects in Toronto right now that the market has gone down.”

She says even deep-pocketed investors are biding their time before tendering offers on condos.

“Most of the buildings in Toronto are also being used for Airbnb,” she added, “but they’re cutting down on those and that’s keeping investors on the sidelines. I feel the market is going to slow for a while but there are still a lot of people coming in.”

Immigrants don’t typically buy upon their arrival, save for people working in fields like information technology, says Asdhir. Moreover, she says she has seen many listings taken off the market  because the sellers weren’t receiving satisfactory offers.

Parts of downtown have high condo inventory, while others – like the financial district – don’t. Areas outside of the core have high inventory as well.

Downtown condos are priced at $1,000 per square foot, but with such high inventory she believes prices are due to dip.

Further to that point, she says, new mortgage stress tests, to take effect January 1, will prohibit many buyers from becoming homeowners. She has already noticed many people aren’t getting qualified for mortgage approval because of the high prices, and the 200-basis-point stress test will likely exacerbate that problem.

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