Condominium Market Share Continues To Climb In Major Canadian Centres

Christopher Alexander, President, RE/MAX Canada, explains how condo sales are rising across the major cities in the country.

Full video is here.

PRESS RELEASE

TORONTO and Kelowna, BC, Oct. 13, 2022 /CNW/ — Condominium market share has grown in major urban centres across the country yet again this year, a reflection of new market realities and the shifting course of entry-level buyers, according to a report released today by RE/MAX Canada.

The 2022 Canadian Condominium Report by RE/MAX Canada examined more than 120 communities in six major markets, including Greater Vancouver/Fraser Valley, Calgary, Edmonton, Greater Toronto, Ottawa and Nova Scotia. The report found that condominium sales were down in the first eight months of 2022 in four markets, including Greater Vancouver/Fraser Valley, Greater Toronto, Ottawa and Nova Scotia, while Calgary and Edmonton reported double-digit sales increases over the same period in 2021. Condo values are up in almost all markets year-over-year, with many bolstered by a robust strong first quarter.

Condominium market share, as a proportion of total sales, advanced across the board, with upswings reported in five out of six markets analyzed, ranging from a low of .08 per cent in Ottawa to a high of 6.6 per cent in the Fraser Valley. Compared to year-to-date levels one year ago, condominiums now represent just over 54 per cent of total residential sales in Greater Vancouver, 36.3 per cent of residential sales in the Greater Toronto Area, almost 32 per cent of sales in the Fraser Valley, just over one in four sales in Edmonton and Ottawa, and almost one in five sales in Calgary. Nova Scotia was the only market to register a decline in condominium market share.

“The affordability factor is the key issue in today’s housing market,” says Christopher Alexander, President, RE/MAX Canada. “Rising interest rates have slowly eroded purchasing power and, despite lower housing values and cooling market conditions, buying a house is more challenging now than ever before. For those who have adjusted expectations with every rate hike, the cost of carrying a mortgage versus renting is now more comparable, given sharp double-digit increases in rental rates throughout the major markets, but especially in BC and Ontario. So, while fewer sales have occurred in 2022, condominiums represented a greater proportion of overall sales, as buyers gravitated to affordable options to achieve home ownership.”

The report provides additional context to the recent decline in sales, noting that 2021 marked a year of record sales in almost all markets. Given that a significant amount of buyer demand has been satisfied, and a portion of buyers are waiting it out on the sidelines due to rapid rate increases, the decline in sales in 2022 was not only expected, but the natural course of events.

“Buyers should be cautioned that the current slowdown in sales activity is likely not indicative of a crash,” says Elton Ash, Executive Vice President, RE/MAX Canada. “Prices for condominium product have remained stable or risen in most major urban centres year-to-date. Conditions are balanced overall and, as such, buyers and sellers with realistic expectations should be able to achieve reasonable objectives.”

Buyers, for the most part, have finally been able to take a breath in Canada’s active condominium market, since the heated momentum of recent years has cooled with inflationary pressures, shifting conditions into more balanced territory. That balance has provided a rare window of opportunity for those ready and able to make their moves – from first-time buyers gaining a foothold in the market to move-up buyers and empty-nesters. Evidence of this is occurring across the board.

Regional Highlights

• In Greater Vancouver and the Fraser Valley, the condominium market in some communities has held up better than others. Sales in Coquitlam, for example, were off last year’s breakneck pace by just 12.8 per cent, clocking in at just under 1,000 sales in the first eight months of the year, compared to 1,146 during the same period in 2021. Vancouver West also held up well against the changing tide, registering a 12.4-per-cent decline year-over year, with 3,211 versus 3,666 sales one year ago. Surrey North in the Fraser Valley also remained relatively strong, with sales down 11.7 per cent from last year’s record pace. Just over 1,100 apartments were sold between January and August, down by 155 sales from the 1,255 sales recorded one year earlier.
• Condominiums ownership continues to resonate with buyers in the city of Calgary. Eleven out of the 12 areas featured in the Calgary report experienced an increase in the number of condominium apartments changing hands, ranging from an upswing of 17.5 per cent in Eau Claire on the low end to an impressive 338.5 per cent rise in sales in Saddle Ridge.
• Affordability played a substantial role in the upswing in condominium sales in Edmonton this year. Twenty-two of the 26 markets highlighted in the report experienced an increase in homebuying activity, with sales up two per cent in Queen Mary Park to 112 per cent in Lymburn.
• In the Greater Toronto Area, double-digit declines in sales of condominium apartments and townhomes were noted in most 416/905 districts, with the exception of the 416’s Bathurst Manor/Clanton Park (C06) and Yonge-Eglinton-Forest Hill South-Cedarvale-Humewood (C03) as well as the 905’s Halton Hills and Whitby, where sales were off record levels by just 7.5, 8.8, 7.7 and 9.3 per cent respectively. Two areas—Caledon and Orangeville—managed to squeak out an increase, with condominiums sales up a nominal 8.3 per cent in Caledon, while rising a considerable 33.3 per cent in Orangeville.
• In Ottawa, condominium sales are holding their own, with many buyers returning to the downtown core. While the number of units sold overall were down in the city year-over-year, sales were on par with 2021 levels in Centretown, and two areas – Lowertown Market and Old Ottawa East – were off by just 2.8 and 4.2 per cent respectively.
• While softer detached housing values have detracted some entry-level buyers from condominium ownership in Halifax–Dartmouth, condominiums remain a popular choice for those looking to gain a foothold in the residential market. Overall inventory levels have been an issue in the Halifax–Dartmouth area this year, playing a role in the downturn in condominium sales. Multiple offers are still occurring on some condominium product in key areas of the city.

“Despite the recent shift to a more sustainable pace of sales, the market continues to demonstrate some resilience,” notes Alexander. “The factors at play that have served to moderate demand are temporary variables. All boats rise and fall with the tide. Condominium sales activity is expected to rebound in 2023 and 2024 as interest rates begin to stabilize or decline. As demand for condos ramps up again, inventory will contract, and price growth will likely regain a stronger upward trajectory. The impact of the slowdown in new condominium construction starts combined with an inadequate supply of purpose-rentals against a backdrop of intensified population growth may exacerbate inventory levels of existing product.”

Greater Vancouver Area/Fraser Valley

Rising interest rates have contributed to softer home-buying activity in both Greater Vancouver and the Fraser Valley, with just over 12,000 strata apartments changing hands in Greater Vancouver during the first eight months of the year, down from 15,060 sales during the same period in 2021. The median price year-to-date, however, has climbed more than seven per cent to $793,466, up from $740,221 one year ago. In Fraser Valley, apartment sales were off last year’s pace by 25.2 per cent in the first eight months of the year, with just over 3,800 units sold compared to more than 5,000 during the same period in 2021. Inventory levels have been rising but in August, apartment listings fell to 1,602 in Greater Vancouver markets, down from 2,158 in August of 2021. The same held true in Fraser Valley in August, when the number of new listings fell 5.3 per cent year-over-year, to 554 units.

First-time buyers have been especially impacted by higher interest rates, with the stress test now sitting at approximately seven per cent. Rapidly escalating rental rates have not helped, flattening any opportunity for renters to save for a down payment. Those who are able to accumulate a down payment and qualify are active in the market, which has pushed up condominium market share year-over-year, with apartment sales now comprising 54.3 per cent of total residential sales in the GVA, up from 48.2 one year ago, and 31.9 per cent in the Fraser Valley, compared to 25.3 per cent in 2021.

Buyers continue to exercise patience, waiting for the right listing to come along. Popular destinations include the tri-city area of Port Moody, Port Coquitlam and Coquitlam. Some opportunities exist in markets such as New Westminster, where apartments offer good value for the dollar and a more central location. Those seeking affordability and lifestyle have been attracted to Vancouver East, in communities such as Commercial, Main and Mount Pleasant, where lots of trendy restaurants and shops are popping up. Median price in the area sits at $675,000, up eight per cent over last year. Sales in Vancouver West are also holding steady, down just 12 per cent year-over-year, with more than 3,200 sales reported between January and August of 2022, compared to 3,666 during the same period in 2021. Fraser Valley markets that were sought-after during the pandemic, such as Langley’s Willoughby Heights and Walnut Grove have experienced a decline in demand for condominium apartments. Affordability remains a challenge in Greater Vancouver and the Fraser Valley, but moderating residential values may take some of the sting out of higher mortgage rates. While the Bank of Canada is committed to bringing inflation to its knees, consumer uncertainty is expected to be a factor in the market until the Bank’s objective is achieved, markets stabilize and rates start to decline.

City of Edmonton

The affordability factor continues to drive condominium buying activity in Edmonton, with year-to-date sales (January to August) up almost 23 per cent over 2021 levels. Nearly 5,000 apartments and townhomes changed hands in the eight-month period, up from just over 4,000 during the same time in 2021 as buyers adjust their expectations due to higher mortgage rates. Despite the increase in sales, values in the city remain relatively flat, sitting at just over $234,000.

Almost 85 per cent of the 26 Edmonton MLS neighbourhoods examined are reporting year-to-date percentage increases in unit sales, with Lymburn (+112 per cent), Tawa, (+82% per cent) Larkspur (+80 per cent), Rutherford (+66 per cent), and Walker (+66 per cent) leading the way with double-digit gains, compared to the same period in 2021. Meanwhile, demand has waned year-over-year in Edmonton’s core, where the highest concentration of apartment condominiums can be found, with condominium sales down three per cent in Oliver and 13 per cent in Downtown.

In recent years, the city has moved to revitalize the downtown area through its ICE District – a mixed-use community surrounding the Rogers Centre that includes residential, retail and commercial development. The city has also invested in festivals, concerts and movie nights in the Art District’s Churchill Square, and has created pet-friendly parks and community gardens that attract both local residents and tourists. With employees set to return to downtown offices in hybrid work schedules, the current lull in the market presents opportunity for those seeking affordable home ownership.

Bachelor and one-bedroom condominium apartments in the core have fallen below the $250,000 price point at a time when rental rates are rising. Townhomes continue to be a popular choice in Edmonton, with many buyers willing to travel farther afield for newer product. The year-to-date average price of a townhome has risen almost five per cent in 2022, climbing from $231,470 in 2021 to $243,038. While some higher-priced townhomes continue to linger from the heated spring market, buyers are starting to tweak their pricing to reflect current market realities. Seventeen of the 26 MLS markets analyzed posted a year-to-date increase in average price, ranging from one per cent in Terra Losa ($216,286, vs. $215,012 in 2021) to as high as 20 per cent in Larkspur ($225,236, vs. $188,112 in 2021). Given that the province of Alberta is expected to lead the country in terms of economic growth this year and next, both condominium sales and average price in Edmonton are likely to remain stable for the foreseeable future.

City of Calgary

The Calgary condominium market has experienced considerable growth in recent months, with apartment sales up almost 65 per cent year-over-year. Close to 4,600 condominium sales were reported between January and August of this year, up from 2,778 during the same period in 2021. Average price has followed in lockstep, with year-to-date condominium apartment values climbing six per cent to $279,306 in 2022, up from $263,502 one year prior.

Rising interest rates and the affordability factor have contributed to the popularity of the condominium lifestyle in recent years. Almost one in every five properties sold in Calgary is a condominium. With each Bank of Canada announcement on hikes to the overnight rate, entry-level buyers re-evaluated and re-adjusted to new market realities. Rapid escalation of rental rates also prompted would-be renters to pursue home ownership, with the monthly rate for a one-bedroom apartment in Calgary rising to $1,597 (+29.8 per cent year-over-year) and a two-bedroom apartment now sitting at $1,891 (+19.7 per cent year-over-year).

Condominiums in suburban locations are most popular with today’s buyers. Areas such as Saddle Ridge, Panorama Hills, Currie Barracks and McKenzie Town have experienced strong demand over the past eight months, with sales figures for condominium apartments doubling year-over-year. Values are climbing as well, with double-digit increases posted in Saddle Ridge, Panorama Hills, Currie Barracks, Garrison Woods and Killarney/Glengary. However, demand for condominium apartments in the city’s downtown core remains lukewarm as people continue to work from home. That could change in the months ahead as more people return to jobs in the downtown core.

Buyers from out of province – typically British Columbia and Ontario – continue to pour into Calgary and invest in the city’s housing stock. Inventory levels for all types of property are down from year ago levels, setting the stage for another heated housing market come January. Alberta is likely to lead the country in economic performance this year, with GDP expected to reach 4.9 per cent in 2022. Economic fundamentals continue to improve in the province overall, consumer confidence is on the upswing and housing markets in both Calgary and Edmonton reflect the provincial return to growth and prosperity.

Greater Toronto Area

Despite a late summer rebound in the condominium sector, home-buying activity in the Greater Toronto Area (GTA) remains more than 30 per cent off last year’s robust levels. Between January and August of this year, almost 21,000 condominium apartments and townhomes were sold, a stark contrast to the 30,383 sales that occurred during the same period in 2021. Values, however, have trended higher in the GTA, now sitting at $796,457, up from $688,137 one year ago. While the most significant average price increases occurred during the heated first quarter of 2022, stability in the downtown core has likely been a factor in keeping values on even keel.

Many condominium properties that were listed for sale earlier in the year were taken off market and re-listed as units for lease, given the substantial upswing in rental rates. The average monthly cost of rent in the city continues to increase year-over-year, rising 17.1 per cent for a one-bedroom ($2,329) and 24.3 per cent for a two-bedroom ($3,266), according to the Rentals.ca August Report. This has served to reduce inventory and keep prices relatively stable, particularly in the sought-after Bay Street Corridor, Waterfront Communities (C01/C08), and the Annex/Yorkville areas.

Investors have re-entered the condominium market in recent months, looking at properties valued between $1 million and $2 million in the core. Many are cash buyers and prepared to move quickly when the right property comes along.

Affordable condominium product has also held steady, with demand in neighbourhoods such as Liberty Village a constant throughout the softening in the overall market. Apartments priced from $500,000 to $700,000 continue to experience the lion’s share of activity in the GTA. At the other end of the spectrum, some move-up activity is also occurring as condominium owners take advantage of the current lull to trade up to larger units, some within their existing buildings. Downsizing has also contributed to strength in some midtown markets. In Bedford Park-Nortown (C04), for instance, condominium developments along Avenue Road have resonated with empty nesters and retirees who like the convenience of condominium ownership in neighbourhoods that offer shops and restaurants within walking distance. However, pre-sale condominium construction is particularly challenged by the current environment. Builders who are too far invested are moving forward, but many of these buildings are now selling at $1,400 to $1,500 per square foot. This, at a time when the resale market rate is $1,100 per square foot. Development costs alone have risen an estimated 18 to 22 per cent in the past year.

With favourable population growth forecasts and limited inventory available for sale and lease, the country’s largest condominium market is expected to remain relatively healthy, riding out the current turbulence until the market stabilizes and returns to more normal levels of activity.

Ottawa 

Ottawa’s condominium market is holding relatively steady, despite rising interest rates and some softening in the overall market. Almost 3,000 units have sold between January and August of 2022, down approximately 17 per cent from the 3,577 sales reported during the same period in 2021. Year-to-date average price remains solid, up almost nine per cent to $457,771, compared to $420,651 in 2021.

Certain areas have held their own this year, including Centretown, where condominium sales are on par with year-ago levels. Lowertown Market and Old Ottawa East are slightly off last year’s pace by 2.8 per cent and 4.2 per cent respectively. The rapid appreciation of freehold properties continues to prompt would-be buyers to consider condominium ownership. Young professionals are starting to gravitate to downtown neighbourhoods such as Centretown, the Glebe and up-and-coming Old Ottawa East, which fell out of favour at the height of the pandemic. Properties that offer lower condominium fees, amenities, parking and storage lockers are most sought-after. Buildings such as 179 Metcalfe are a popular destination, with one-bedroom apartments starting between $450,000 and $475,000 and two-bedroom units priced from $630,000. Downsizing buyers are also active in the core, but prefer established communities such as the Glebe, Westboro and the Golden Triangle. In fact, there is a shortage of luxury inventory in the Glebe, especially over the $650,000 price point where units are few and far between. Much of the new inventory on the market right now is rental. Students have also returned to campus, driving demand for condominium apartments that are close to University of Ottawa and Carlton.

While buyers are mindful of the Bank of Canada’s interest rate hikes, they’re acutely aware of the change in market conditions. The shift from a seller’s market into more balanced territory has given many buyers ample room to breathe. This, at a time when a good selection of condominium product exists across various price points and neighbourhoods, sellers are more open to negotiation, and overall market conditions are more favourable. Three months of inventory is currently available for sale, and sellers have found that days on market are stretching longer. Most buyers feel that the worst is over, with some minor adjustments coming down the pipe, fluctuation should be minimal.

Nova Scotia/Halifax–Dartmouth

While inflationary pressures have flattened overall housing values across Nova Scotia, uncertainty continues to hamper home-buying activity across the board. The condominium market in Nova Scotia has slowed in tandem, with sales off last year’s levels by 35 per cent. Condominium sales in the province fell to 545 between January and August of this year, down from 839 during the same period in 2021.

The year-to-date average sale price, which rose 21 per cent to $462,173, largely reflects a robust first quarter, with values softening somewhat in the second quarter. Single-detached home pricing for certain areas is still within the reach of some first-time buyers – which has those buyers, who qualify for a mortgage, opting for freehold properties as opposed to condos. Still, entry-level condominiums offer buyers an opportunity to realize home ownership at a lower price point – now running at an average price of approximately $441,569 in the Halifax–Dartmouth area.

The market is less competitive now than it has been in recent years, but multiple offers are still common. Inventory has increased slightly but is still low in comparison to last year’s levels. Days on market for condominiums have fallen by 14 per cent in August to 24 days, down from 28 days during the same period last year. While the Bank of Canada continues to raise rates, uncertainty is expected to prevail. Once stability returns, home-buying activity will likely normalize.

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