Toronto’s condo market, which for years was robust and posted yearly gains, has softened and regular investors are having to make difficult choices. According to the Financial Post, where investing in a condo seemed like a solid, secure investment even just a year ago, because of the pandemic and the exodus from the city’s core, rents have plunged and condo prices have dropped.
If you purchased an off-plan condo two years ago at the peak of the market as an investment, then you could very well be underwater today unless you are able to carry the loan costs. With the dip in what owners can ask for in rent, many condo buyers are seeing themselves in the scary position of either having to sell at a loss or cover the shortfall in rent that would have otherwise covered the mortgage payment. Since rents have fallen significantly since the start of the year, what an owner can now ask for in rent will, in many cases, no longer cover the mortgage, insurance, condo fees and taxes – leaving owners out-of-pocket for the difference.
The hardest hit sector are condos that are yet to be finished. People who have bought off-plan and are waiting for their condos to be completed are now seeing that they will likely be unable to afford their units once completed. In fact, according to the Financial Post article, many of these buyers are even willing to sell at a loss just to get out of their contracts.
There is no doubt that the market will recover. However, until that happens the condo market is likely to remain flat and could potentially see an even larger drop than the 3% decline that we have seen this year.
While the market might be facing some challenges right now, once the pandemic is over and life begins getting back to normal, there is every reason to believe that people will once again want to live in the city and that condo sales will again be a solid investment.