Toronto’s hot housing market calms as economy reopens, attentions shift to summer revelry

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Many of Toronto’s young urban dwellers are reveling in the city’s reawakening and putting weighty real estate decisions on hold for now.

“I can definitely feel the beat on the street change,” says real estate agent Riley Boyko of Cloud Realty, who lives and works in downtown Toronto.

Queen Street, King Street West and other hotspots are buzzing with people dining al fresco and socializing with friends after strict lockdowns during the third wave of the COVID-19 pandemic.

That focus on revelry and relaxation has brought some calm to the real estate market, Mr. Boyko says, saying that he senses a shift in buyer sentiment as people turn their focus to planning long weekends and escapes to the cottage.

“Canadians treat summer differently,” he says. “Just try getting a patio reservation.”

Sales began to slow down in April and May across Canada, and the trend appears to be continuing into the summer.

Mr. Boyko notices the change most markedly in condos with asking prices under $1-million, which are seeing less interest from first-time buyers than they were a few months ago.

The condo rental market has started to recover with people moving back to work in the city, but it’s not yet back to full strength, Mr. Boyko says.

Some investors anticipate that rents will begin rising in the fall after a long downturn.

“If you are looking at a condo now, you are an investor,” he says of the market for smaller units. “It’s already giving investors the signals they need rather than the noise.”

At the same time, the demand for condos in the preconstruction segment is fierce, he says, pointing to projects that have sold out in three days at lofty prices of about $1,500 a square foot.

“It’s basically a real estate futures market,” he says of projects that have yet to break ground. “A lot of the sentiment is very positive.”

But while entry-level condo sales cool, units selling for $1.5-million to $2-million and up remain in high demand, Mr. Boyko says. Large units with outdoor terraces are selling quickly as baby boomers and empty nesters see the appeal of living downtown or on the waterfront.

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During the first year of the pandemic, many owners of large houses put their plans to downsize on hold when restaurants, galleries, movie theatres, arenas and many other downtown attractions closed their doors.

Now, vaccines are ramping up, venues are opening and Mr. Boyko sees homeowners trading their large house and backyard for a condo.

“Why did they pick downtown? Because they don’t want to be bored,” he says. “Our youngest demographic and our oldest demographic both want the same thing: entertainment.”

As listings for single-family houses come onto the market, Mr. Boyko is noticing the odd paradox that buyers move to the sidelines just as bidding wars calm down, instead of taking advantage of the lull. Some properties are not selling on the night reserved for reviewing offers. Others are selling at rich prices but without the frantic bidding that erupted in the early part of the year.

“Buyers only want to buy during a sellers’ market,” he says.

As for sellers, he is recommending that homeowners with a pleasant garden or backyard pool list during the summer months. Meanwhile, owners with an entry-level downtown condo should likely hold off.

“If you have a small unit that appeals to a first-time buyer, you might want to delay,” he says. “Right now, they’re busy hitting the patios.”

John Lusink, president of Right at Home Realty Inc., says sales remain strong at the firm’s 12 branches throughout Ontario, but the pace is less frantic than it was in February and March.

“I think fatigue has definitely set in to some extent,” he says.

Typical competitions often saw 10 or 15 bidders vying for a property in the early months of 2021, he says. Now three to five buyers might submit bids on offer night in many places.

Meanwhile, listings have increased but not by enough to have a big impact, he adds. Sellers who are listing now may feel more comfortable having potential buyers tour their house now that COVID-19 case counts are dropping in the province. Others may be motivated by the lofty prices that many homeowners are achieving.

Many downsizers and retirees fit into that category, he says.

“There is certainly a certain group of sellers that says ‘I need to take advantage of the trend,’ ” Mr. Lusink says.

But this summer may not be as slow as usual, he adds, because the province is just coming out of lockdown and some companies are starting to open up their offices. Prices may ease off from their meteoric rise, but he expects sales will continue to be strong.

The biggest increases in prices and sales for his firm have been Barrie, Ottawa and Niagara, he says. “So far that trend seems to be holding firm.”

But while a stream of people has moved out of downtown Toronto during the worst months of the pandemic, Mr. Lusink doesn’t expect the exodus to continue at the same pace. “Career growth remains a priority for many professionals living in the city, as they fear not being able to find the same work opportunities in smaller urban areas in the province,” he says.

A recent survey commissioned by Right at Home found that 63 per cent of those surveyed would not want to move farther away if their employer required them to work in the office for part of the week. If offered the opportunity to work from home permanently, however, 55 per cent would consider moving out of their current city or location.

Looking ahead, Toronto-Dominion Bank’s chief economist Beata Caranci predicts that sales in Canada will continue to unwind from the stratospheric levels seen earlier in the pandemic.

Tighter stress test rules began to take hold in June, she says.

The economist believes that the tight balance between supply and demand in much of the country will keep prices elevated, but some of the heat may dissipate if policy makers bring in new cooling measures, for example.

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