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Toronto’s condo boosters see a market revival - Is There Potential in a 500 Sqft condo Investment?

Despite falling resale condo figures in this city in recent months, Ms. Shim believes that the outlook for condos in Toronto remains strong. And to those who think the units coming on stream in Toronto are too numerous and too tiny, she points out that urbanites in their 20s and 30s are just happy to occupy a rung on the property ladder.

“Get in the head of the people actually buying,” she tells those who wonder how anyone can live in 500 square feet. The market analyst and marketing maven is feeling enough brio to launch a new research firm called Housing Lab. Ms. Shim recently talked about the motivation of buyers during a talk billed “The Condo-fication of Toronto: The good, the bad and the ugly”, at University of Toronto.

Some are young professionals who find the competition in the rental market – where the vacancy rate is hovering just above one per cent – intense.

“The rental market’s on fire,” she says of a market that inspires bidding wars for some units. So, rather than compete, these children of the boomers are buying their own place.

Other buyers are investors who plan to rent the units out.

“These are not people who are flipping. These investors today have long-term thinking,” she says. “It has provided de facto new rental stock.”

The “bad” infiltrating the condo market comes from so-called value engineering. Some developers are finding their costs so expensive that they have to be very hard-minded in order to turn a profit.

“You’re sitting down with a budget and have to make hard decisions.”

Other knocks against the market include some ill-conceived schemes for retail stores at ground level. In some cases, there are not enough people living nearby to support the businesses and the space sits empty.

As for the ugly, Ms. Shim points to the NIMBYism of people who don’t want to see more high-rise towers. She says the “not in my backyard attitude” reflects a fear of condo-fication, but she thinks the density is necessary and the new construction revitalizes older neighbourhoods.

At the residential builder Daniels Corp., vice-president Martin Blake says the company is going ahead with planned launches of new condo projects. Daniels typically targets the first-time buyer more than investors. The company also offers rent-to-own schemes.

Unlike many developers, Daniels sometimes builds first and then sells the units.

“It takes away the uncertainty of the new condo marketplace.”

In the resale market, condo sales have been sluggish since last summer when the federal government tightened the rules surrounding mortgage lending.

In March, condo sales on the Toronto Real Estate Board’s multiple listing service in the 416 area code dropped 19 per cent compared with the same month last year to continue the trend of falling year-over-year numbers.

Nicholas Bohr, an agent, agrees with Ms. Shim that the condo lifestyle is so desirable to some that certain types of buildings will always be sought after. While many buyers in the past considered a condo just a pathway to their goal of owning a detached house, that’s no longer true in many cases, he adds.

“I like to label it as a stepping stone but for a lot of people it’s a lifestyle,” he says. “Some people don’t like to live in a house. They want to live in something new and something sexy and even to change it every couple of years.”

Mr. Bohr says marquee condo buildings by prime builders still remain in high demand. But owners who are trying to sell a unit in a building where there are many other similar units for sale will need to be more patient.

“Prices are based on future expectations,” says Mr. Bohr. “Some are coming down and some builders make condo purchases a good investment,” he says.

In the buildings where there are more competing units for sale, real estate agents also need to be more inventive, he adds.

Mr. Bohr recently printed up 300 cards and had them delivered to tenants in a rental apartment building across the street from a condo tower. “Why rent when you can own across the street?” the flyer asks, suggesting that prospective purchasers get in touch with a mortgage broker.

Mr. Bohr also invites residents of the entire building to a wine-and-cheese open house before he puts a condo unit on the market.

He hopes that owners will tell their friends and family about the new unit for sale in their building. He can also garner first impressions about the staging and price.

“It’s a great way to get some buzz. They can give great feedback,” he says.

Christopher Bibby, an agent with Sutton Group-Associates Realty Inc., says that buyers of resale condo units are being choosy about neighbourhoods and buildings.

Units in buildings that are not in high demand might take a month to sell – even with a realistic asking price and savvy staging.

But for a sought-after building such as a “hard” loft conversion, buyers are often waiting and watching for units to come on the market. Mr. Bibby recently sold a loft in the popular Candy Factory building for an amount above the asking price. Two buyers stepped up with offers.

“If agents are doing their job, they’ll come the first day and that’s what happened here.

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Posted: Thursday, May 02, 2013 12:41 PM by Sutton Realty

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