COVID-19 speeds up home buyer exodus from Toronto, condo market quivers
The coronavirus pandemic is speeding up an exodus to Toronto’s suburbs and beyond as white-collar workers, frustrated with the city’s lack of family-friendly homes, bet they will be able to continue working from home after the crisis ends.
That exodus is putting pressure on Toronto’s once red-hot condo market at a time when a near-record number of units are under construction, hinting at a potential glut in the making.
Many would-be buyers are driving out of Toronto to places like Barrie, a lakefront community north of the city, that has become a hot spot for millennials and families seeking more space for less.
“They tend to be in that tech-type industry where it is very possible to work from home,” said Barrie real estate agent Peggy Hill. “Those people don’t expect to be going back to the office anytime soon.”
Recently, Hill has seen countless bidding wars – one with more than two dozen offers – overwhelming Barrie’s available stock of family-friendly detached homes and starter townhomes.
Average prices for detached homes in Simcoe County, where Barrie is located, rose 6% in July from February, and the total value of sales jumped 84%, according to the Toronto Regional Real Estate Board. The average condo price in the city of Toronto, meanwhile, fell 5.5%, while total sales value rose 19%.
The “tall and sprawl” dichotomy has long been at the heart of Toronto’s housing crisis – shoe box condos in the core and suburban sprawl in the outskirts. Calls for more townhomes and family-friendly condos have long been ignored.
The latest data shows apartment starts are up 22.9% this year, and those for townhomes fell 6.4%.
“We’ve definitely seen a problem… with a tall and sprawl development pattern,” said Cherise Burda, executive director at Ryerson University’s City Building Institute.
While many Toronto developers recognize the need for family housing, small units in tall towers have drawn strong investor demand due to better returns, said CIBC World Markets Deputy Chief Economist Benjamin Tal.
The city itself has played a role in the dearth of townhouses and other medium-density housing. The official plan aims to bulk-build upward in a few core areas while leaving most low-rise streets untouched.
“There’s no intention that we begin to bulldoze our neighborhoods to create new forms of housing,” said Gregg Lintern, Toronto’s chief planner. “That was never the plan.”
The result was a condo boom fueled by seemingly endless investor demand. The typical price of a Toronto condo jumped by 82% from July 2015 to July 2020.
Two-thirds of the condo units being built in Toronto are pre-sold to investors, according to real estate research firm Urbanation. More than half are studio or one-bedroom units.
Condo investors, meanwhile, are getting skittish as the coronavirus pandemic has led to high unemployment, gutted the short-term rental market and sent long-term rents plunging.
“There was always a concern that we were building too many small condos, but up until at least COVID-19, there was more demand for these smaller units than we could build,” said Urbanation President Shaun Hildebrand.
Active condo listings in the city of Toronto have tripled since February, with inventory at its highest point since 2015.
Meanwhile, as city dwellers move out in search of more open spaces, it is putting pressure on everything from housing to waste services and healthcare in smaller centers. The cottage town of Minden Hills, Ontario, has seen a record influx of new residents, many of them permanent, since COVID-19 hit, said Mayor Brent Devolin.
“There’s a lot more people wanting a lot more things,” said Devolin. “There are core services needed to support those people and expanding those doesn’t…