Condos are getting hot again in Canada's biggest cities, fueled by rental demand

Condominium markets in some of Canada’s biggest cities have rebounded strongly this year, and the market is predicted to once again return to pre-pandemic red-hot conditions as rental demand surges and inventories evaporate.

The condo market, which had been hot for years, cooled quickly last year during the pandemic as investors fled, spooked by the exodus of renters from cities to live with families or find cheaper places elsewhere.

Short-term rental demand dried up and first-time buyers flocked to the suburbs and smaller towns to work from home.

This year, the rental market is rebounding on the prospect of white-collar employees and students returning to offices and universities and a strong bounce back in immigration to make up for pandemic-driven declines. Younger buyers are also returning to condos after prices for bigger homes surged during the pandemic.

In the second quarter, the downtown market made up the highest proportion of greater Toronto area condo resales in a decade.

About 12,700 condos sold across the greater Toronto area from January to April, surpassing the 10,300 transactions ahead of the previous market peak in 2017. And while they fell following a March high, they remained 15 per cent higher than pre-pandemic levels.

Across Vancouver, where condo sales previously peaked in March 2016 at more than 2,250, they rose to almost 2,700 in March. Sales in July, while down from March, were 36 per cent above pre-pandemic levels.

Prices have pulled back from March highs, largely due to continued lockdowns in some areas and seasonal trends, raising concerns in some quarters that the market has peaked. But real estate agents said a tightening rental market should boost investor demand, giving the market another leg up.

The jump in demand has helped rapidly absorb last year’s glut of rental properties. Rental supplies in Toronto have fallen to half a month of inventories from about three months’ worth in November, said a senior real estate agent.

Shrinking available supply is further boosting the condo sales market. Construction started on about 1,143 apartment and condo units in June in the Toronto metropolitan area, down over a third from a year ago and almost half the level of two years ago.

And while ongoing construction of condos was at a record 86,149 units in the second quarter, about 92 per cent of this was already pre-sold.

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