A Bay Street condo just sold at a $350,000 loss as sellers remain in 'a tough spot'

Since the unit last sold in 2021, the market has peaked, crashed and shifted. Experts who spoke with the Star pointed out that 2021 had low interest rates, high investor activity, high immigration, and competition for smaller, one-bedroom units. This spring, however, has had higher interest rates, low immigration, investors off-loading small units that are difficult to rent, and buyers competing for larger, family-sized homes.

Condo prices in the city of Toronto have fallen from the average of $730,800 in December 2021, when the Bay Street condo surpassed the million-dollar price point, to $665,500 in April, Toronto Regional Real Estate Board data shows.

Buyers know the condo market is in “a tough spot,” said Toronto realtor Kylie Walters, and they’re “looking for a deal.”

That’s likely one of several factors that appear to have affected the price of the one-bed-plus-den unit.

The condo wasn’t an outlier in the building when it sold for $1.03 million in 2021, Walters said, and the address may have been particularly susceptible to dramatic price changes due to its desirability among investors and international students.

When the federal government began reducing immigration, demand for the building — which is close to the University of Toronto — likely dropped, Walters said, and higher interest rates meant the condos became more expensive for investors to hold onto.

“All of the investors that got into the market at these super low rates, hoping that they would make money in the rental sector weren’t able to fill the vacancies. And not only were they not able to fill them, but they weren’t getting the prices that they needed in order to pay the mortgage when the interest rates started climbing,” Walters said.

End users — an industry term for buyers who want to live in their units — meanwhile, don’t want to live in the “shoebox, one-bedroom, nothing-special” condos that were left behind, Walters added.

Despite the risk of taking a major loss during a sale, investors may have found it was better to sell rather than continue paying the carrying costs, she said.

Markham-based broker Kaylin Smith, who also works in Toronto, said some buyers may also choose to sell in a down market because they’re looking for a home with more space, for example, if their family is growing.

She said interest rate hikes have played the biggest role in the market drop.

“Buyers can no longer qualify or carry those same prices,” she said. “So the values of the properties had to reset in order to match that real monthly affordability.”

Smith emphasized that active buyers looking for a home, as a result, have more options than they have had in years.

“There’s less competition in the market, there’s less pressure for them,” she said. “The prices are gonna be more flexible because people are trying to off-load.”

“It’s the first real time that in years that you can purchase downtown at a meaningful discount,” Smith said. 

Prices for newly built homes, however, have remained high.

Across the GTA, newly constructed condos in April averaged about $1.02 million, according to the Building Industry and Land Development Association.

Walters said prices for new-builds were set out “many years ago” with the expectation that the market would appreciate by six to seven per cent annually, as would typically be expected.

As a result, buyers have retreated from that market, said housing researcher, and founding director of the Missing Middle Initiative, Mike Moffatt.

“We have seen the new market all but evaporate,” Moffatt said. “We’re not seeing much in the way of sales.”

Companies bulk-buying condos and converting them into purpose-built rental apartments are the exception, he said.