Investors desperately trying to ditch Toronto condos they bought pre-pandemic
With rents at record lows and supply only growing, it's never been a better time to rent a condo in Toronto — but buying one, on the other hand, may not be the best investment for the exact same reasons.
With thousands of former Airbnbs flooding the long-term rental market due to the health crisis paired with new, tighter restrictions on vacation rentals in the city, it's not only rents for condominium units that have been dropping, but sale prices, too.
Toronto condo rent prices reach lowest point in nearly three years https://t.co/Q5LpoBDFyJ #Toronto #RealEstate #TorontoRealEstate #Rent #TorontoRent— blogTO (@blogTO) October 16, 2020
Condos — especially smaller ones — are actually the only housing type in the city that has seen prices do anything but soar this year, which is causing grave concern among those who've bought units years in advance of construction.
It seems that now, investors are scrambling to sell off the buyer's rights to their condos before the deals close via what are called assignment sales, which are not a common practice in the industry and can either be a sign of a market that is so hot that you can actually make money on such a quick turnaround — or of the opposite: a complete lack of confidence in a precarious market.
Just got an email from an agent offering a 10% commission for a condo assignment- yes 10%.— John Pasalis (@JohnPasalis) October 16, 2020
With rents tanking and resale condo inventory surging I suspect we’ll be seeing more investors eager to unload their units
These types of contract handovers are often not listed as a typical sale would be, and are done only with the permission of the property developer.
Toronto real estate has long been a buyer's market, a good investment for the few who can even afford it, a sure thing, even with so many condos being thrown up simultaneously and seemingly all of the time.
And though that still very well may be the case for other housing types in the city, it no longer appears to be ringing true for our glut of condos, especially with a record 23,000 new units hitting the market this year alone, immigration down and vacancy rates skyrocketing.
This is primarily an issue for people who bought with the intention of using the property solely as an investment to flip or rent out to others, and are now facing the prospect of falling condo values and rents lower than they were planning on charging.
Negative cash flow disaster for the investor who bought this condo for $922K in 2019 to only be able to rent for $2300— ac_eco (@ac_eco) November 3, 2020
This Toronto condo investment would likely be > $2000/month in neg cash flow (assume 20% down & 1.89% rate)
I mean really what’s the point...#cdnecon pic.twitter.com/J7vg4OFXf8
Players due to close on condos in the near future are now "absolutely shook and affected by the pandemic and what it has done to the rental market, that is what is pushing them to assign," a representative for real estate brokerage REC told the Globe this week.
They added that assignment sales are now making up two times as many of their firm's transactions as they did before COVID-19, now comprising around 20 to 25 per cent of pre-construction sales.
Investors rush to get out of pre-built Toronto condo deals...It is a sign of weakness in the condo market beset by a glut of new units, declining rents and a dwindling number of renters....estimates that 50 per cent were bought as rental units— Rizwan Ali (@rizwanali1980) November 2, 2020
This may not be good news for the industry, but for everyday people who are looking to own a home in the city instead of investors just trying to make a profit, now may be a good time to consider a condo as an option.
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