The condominium market is currently in the penalty box, especially in downtown Toronto. There are a few good reasons for this, some obvious, some not.
1. Immigration is at a virtual stop in Canada. That’s 300,000 people. A vast majority of whom lay roots and form families here in southern Ontario. They start with affordable housing and condominiums (whether renting or purchasing) that fit that bill. This results in decreased demand for condominiums in downtown Toronto in particular.
2. The government has enacted changes and redefined short-term rentals. Individuals can only rent out their principal residences as a short-term rental for a maximum of 180 nights per year. Last year, MonsterMortgage.ca financed 25 condominiums for one client who was operating an Airbnb business. They were not alone, many people in Toronto took up this kind of business because it was very profitable. One downtown condo issued over 800 key cards in two months! The City of Toronto would like some of the 6,500 short term rental homes listed to return to the long-term housing market. This has resulted in decreased demand for condominiums.
3. Toronto has an abundance of foreign and regular students that play a big role in the downtown condominium rental market, but most students stayed home this year, with almost all classes going online. This has placed downward pressure on rents and simply put; lower rents mean lower property values. This has also resulted in decreased demand for condominiums.
4. As rents in Toronto continue to decrease in 2020 and 2021, there will be some great value created in this asset class. I would not rush in and buy now, as no one wants to catch a falling knife. The last time condominiums decreased in value was in 1989 and that decline lasted almost three years. Once again, an end to COVID will play a big role in changing the demand.
There certainly is one positive that has come from all of this – as rents decrease, it gives people the opportunity to save money. Since the financial crisis in 2008, landlords have had it pretty good. This market change does even the playing field for the first time in a long time.
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