Episode 15: What's Behind The Condo Crash

[00:00:01] Speaker A: You are listening to therealestatepodcast ca, brought to you by jnc toronto real estate group. Well, hello, everybody, and welcome back to TheRealEstatePodcast CA, where we peel back the layers of the Toronto housing market and help you make sense of all the headlines. I'm John. [00:00:25] Speaker B: And I am Cheryl. [00:00:26] Speaker A: And we are the JNC of the JNC Toronto Real Estate Group. And today we're diving into something that has a lot of people talking. Today's episode is called what's behind the Condo Crash. So what happened and what happens next? We're going to dive deep on the numbers, the policies, the panic, and yes, the opportunities, too. All right, so, Cheryl, would you call this a crash? [00:00:52] Speaker B: This is a very complicated question. [00:00:54] Speaker A: Yes. [00:00:55] Speaker B: Do you want me to go into my complicated answer? [00:00:58] Speaker A: Yes, I do, actually. [00:01:00] Speaker B: Yes and no. Yes. Because the overall losses we have seen over the course of, let's say, since 2022, and we hit a peak in February, 2022, have been sort of sliding since. [00:01:14] Speaker A: Yeah. [00:01:14] Speaker B: Would constitute a crash because we've lost 25%. [00:01:19] Speaker A: Yeah, it's been a bunch. [00:01:20] Speaker B: But a crash by definition happens in a shorter period of time. So this happened over a period of time that one might say it was a correction. Yeah, but a correction is usually by numbers. [00:01:31] Speaker A: 5 to 10%. [00:01:32] Speaker B: Yeah, a little lower. So it. It's a confusing question that I don't have a direct answer for. Yes and no. [00:01:39] Speaker A: Okay. Perfect. [00:01:40] Speaker B: Needs context, needs nuance, you know, so don't believe all the headlines without the context. [00:01:45] Speaker A: I guess our episode being called what's behind the Condo Crash is somewhat correct. [00:01:51] Speaker B: Clickbait. John. [00:01:52] Speaker A: I know. It's all about. Right. I pulled the definition off the Internet and they say a moderate healthy price dip, 5 to 10% is a rebalance of a hot market, whereas a rapid decline of 10 to 20% is considered a. Is it a crash? And we're kind of between the two. [00:02:10] Speaker B: But something in your definition that's even more interesting is a crash is a severe, severe, rapid decline, often linked to economic collapse, leading to widespread panic, foreclosures, and systemic failures. So this is why they say happens over a short period of time and things kind of go kaboom. [00:02:25] Speaker A: Yeah. [00:02:26] Speaker B: Where a correction is something of a normal market adjustment. This feels a little bit like a normal market adjustment as far as, like the losses that we've seen because things were so out of control, like with the upside down crash going on in 2022. But at the same time, there's been such a large loss. [00:02:44] Speaker A: So, yeah, it's Kind of in between that, I guess because there hasn't been the major economic failure. All of a sudden. Foreclosures which indicate a crash. It' bit more of a correction than a crash. But I'm going to call it a cross between the two. I'm going to call it a crash. [00:02:59] Speaker B: I know. Don't say that again. [00:03:02] Speaker A: I was going to call it a crash section. [00:03:03] Speaker B: I don't like that one either. [00:03:04] Speaker A: Okay. Crash it is. [00:03:07] Speaker B: So you said something about systemic failure and foreclosures and whatever. There haven't been that many foreclosures on the end user side. But would the fact that many people can't close on their pre construction. [00:03:23] Speaker A: That's a, that's a big issue and we're going to get into that. Okay. Because we're actually going to. [00:03:27] Speaker B: Jumping ahead. [00:03:28] Speaker A: You always jump ahead. But that's fine. I love it. [00:03:30] Speaker B: Sorry. [00:03:31] Speaker A: So any way you look at it, it's, it's troublesome. The, the condo market's not in. It's facing its worst downturn in 30 plus years. Today's podcast, we're going to break it up into two parts. We'll do resale and we'll do new construction. Spoiler alert. Both are struggling, but for slightly different reasons. And it's interconnected, as I'm sure you'll let us know. [00:03:53] Speaker B: Cheryl, I have all the answers. [00:03:56] Speaker A: That's right. We're also going to share some real world examples from our experience working with our buyer and seller clients, especially from 2025. I've pulled a few numbers there because we've had a lot of really candid conversations with people that have bought pre construction, with people that have had resale with buyers, with sellers. So we're going to give you some real world examples a little bit later in the podcast. Let's start with the big elephant in the room, I think for the majority of people reading condo market headlines and that is the state of pre construction. [00:04:25] Speaker B: Yes, yes, yes. [00:04:27] Speaker A: So let's look at the big picture. We can check in on the market temperature and the stats and then we'll get into the how and why it happens. So I want you to pop over to the stats page. We're going to go through these just in a little bit. [00:04:38] Speaker B: Okay. [00:04:39] Speaker A: So let's actually rewind to the pandemic. Interest rates were rock bottom. People had extra savings, nothing to spend it on. I think that this all helped in fueling both the freeholds price, price explosion which we saw. And the developers in the condo side of things were, were definitely Making the most of this opportunistic opportunist. They were cranking out pre con projects and they were pricing them speculatively. [00:05:08] Speaker B: Yes. [00:05:08] Speaker A: Where they thought they were going to be, you know, with sustained growth from the time that people bought the project to before they put shovels in the ground, all the way to through to completion. [00:05:19] Speaker B: May I speak to that for once? [00:05:20] Speaker A: Yes, absolutely. [00:05:22] Speaker B: Before we get into what was happening in that 2021, 2022 timeline, I think the reason why the developers did that, and I am, this is just opinion and I'm pulling this just from, you know, how I feel. This is not based in something I have researched. [00:05:38] Speaker A: Right. [00:05:41] Speaker B: When we first got into real estate, we saw some of our clients who were realizing quite a lot of gains of pre construction they had bought previously. And this will be in the 2015, 2016, 2017, like that era. People bought pre construction and they're flipping them 2017-2019, let's say. And they're making money off of that purchase because they bought that pre construction at a price that was probably maybe a little bit more than resale, but not a lot more. Right. You were paying a little bit more because you had choice. And there were all these other moving parts of buying pre construction. You could, you know, your deposit is over time, all this stuff. I think developers picked up on that and they're like, hey, wait a second, why are all these sellers selling two years after moving in? We could be making that money so by the time that it closes, you know, they have to hold onto it for a little bit longer. And we made, you know, we sold it to them at tomorrow's price. So we made that money. And then combine that with COVID and low interest rates and the demand and all of the speculative stuff. It got out of control. [00:06:46] Speaker A: It did. You had a lot of mom and pop investors. [00:06:48] Speaker B: I mean, it got out of control with pricing too. [00:06:50] Speaker A: Oh, totally. But the demand was, was crazy. So they were pricing them so high and people were still eating it up. [00:06:56] Speaker B: Yeah. Which is crazy. [00:06:57] Speaker A: Yeah. There was overseas buyers back then, before the ban. [00:07:01] Speaker B: They were targeting them. [00:07:03] Speaker A: There were some assignment flippers before when it actually made sense. You know, like we, we earlier on, like in the early teens when people or mid teens when people are buying and the, the, the market was so hot, prices were going up. So people were making money off assignments. That just doesn't happen anymore as well. [00:07:19] Speaker B: I can't even imagine it happening. And I will be honest. We have never been big proponents of the pre construction. [00:07:28] Speaker A: That's right. [00:07:28] Speaker B: Purchase. And I could never really logically understand, especially as we got into these, I see on your page here, 1500, 1700. I remember saying out loud to you, oh my God, this project is 1700 per square foot. [00:07:40] Speaker A: Yeah. [00:07:40] Speaker B: You know, when in actuality 1000 or 1200 per square foot was what good buildings were selling for in town. And I was like how, like how is that make sense to somebody? [00:07:49] Speaker A: So yeah, buyers were paying 15 to 1700 per square foot in 2022. [00:07:53] Speaker B: So would you say everything was a gamble? Like was the developers gambling? Were these mom and pop investors gambling? [00:08:00] Speaker A: Were there's always some risk involved because you have no idea what's going to happen with the market. So yes, there is a gamble going on there and a lot of people did very well. But you know, if you're playing with house money, you can't always be on a hot streak. [00:08:14] Speaker B: Very. They did very well for a short period of time and then everything changed. [00:08:19] Speaker A: Well, let's talk about doing very well. There's a few buildings that we've done business in, especially around 2018, 2019, when they did pre construction purchases back in 2013, 2014 and paid like 500 bucks a square foot or less. And then they were getting $1,000 per square foot in 2018 or close to it. [00:08:39] Speaker B: Yeah. [00:08:39] Speaker A: And, and there were some people that did very, very well. [00:08:42] Speaker B: They doubled their money in four years. [00:08:43] Speaker A: And those are the kinds of people that thought oh my God, this is so easy. And then they went ahead and you know, kind of doubled down and decided to take that. It's like playing with house money and start buying more pre construction projects. But and just thinking that you know, 10% per year sustained growth was, was going to happen, obviously it was just unrealistic. Definitely unrealistic. So you know, you fast forward to today, the resale units and the recently completed buildings that were selling for 15 to 1700 per square foot are selling. I wouldn't say they're selling for a thousand per square foot, but the, the average condo per square foot price in sort of downtown Toronto is around thousand bucks a square foot right now or even less. So we see that the interest rates as well are more than double what they were right now. The interest rates are about 130% more from the 2021 low. And buyers are showing up underwater on closing day, meaning that it's not worth what they paid for it. That's a brutal surprise. So investors who bought 2020, 2021 are facing 30, 40% losses in some cases appraisals are coming back well below purchase price and it's forcing the buyers to absorb big gaps or to walk away. Um, they could lose their deposit. They can risk being sued by the developer for any difference in the eventual sale price as well. So. And, and I just want to talk about one of our. Go to mortgage brokers. One of the things he said is that the buyers are. Are getting destroyed with appraisals right now. [00:10:15] Speaker B: Yep. [00:10:16] Speaker A: He said that it's really bad for a lot of people. RBC is doing blanket appraisals that are saving a lot of people if they qualify. Um, but it's. RBC is making it very hard for those people to qualify. [00:10:27] Speaker B: You talk a lot about this when we're just having regular conversations with some of our clients and friends that people purchased at these really high prices and they were qualified at the time on really low interest rates. So now those prices that they purchased at high are coming back with appraisals that are low and the interest rates now are flipped so they're higher. And that is creating chaos. Really. [00:10:53] Speaker A: It is. [00:10:53] Speaker B: Because these people now can't. Their property is not worth what they bought it for and they can't afford to close. Like it's two different things going on there. [00:11:01] Speaker A: And if they can't close, then they're in breach of contract and developers are starting to go over those people or. [00:11:05] Speaker B: Go after those people. That's the point I'm trying to make, is that there's these two major things that are at play that are. And it's not just the odd person. It's a large portion of those buyers. [00:11:15] Speaker A: Tons of people. [00:11:16] Speaker B: Some people can figure it out and they find the cash. And to be able to come up with the difference. Some people are still getting qualified. It's just the amounts that they're getting qualified at are much higher than they were expecting. And they bought it as an investor. The rents aren't covering. And so they're going to be out. [00:11:33] Speaker A: Of pocket for potentially, you know. [00:11:35] Speaker B: Yeah, we have clients that are out of pocket. Like thousand dollars. [00:11:39] Speaker A: Yeah. Yeah. And then when is the property going to be back to the price that they paid for it? Man, five years, 10 years? [00:11:47] Speaker B: I mean, it's. It depends on so many. [00:11:49] Speaker A: So many. We don't have a crystal ball. [00:11:51] Speaker B: We don't have a crystal ball. And there's not even really a straight prediction. And I remember we saw Benjamin Tal speak last year and he said, don't speak about predictions, speak about. And it was another P word. And I can't think of it right now. I should have wrote it down. Perception, perception. But the thing is, is that as we know, geopolitical, economic, all these other stressors that are affecting the real estate market, it changes by the day. [00:12:13] Speaker A: Yeah. [00:12:14] Speaker B: So you, you can say a typical cycle. We should see this recover in whatever months or years or at this time of year. But we have said that for the last two years and it hasn't come to fruition. So all the predictions and even some of the perceptions of what, how things were going to happen didn't happen the way that they kind of everyone was thinking they would. [00:12:34] Speaker A: Sure. [00:12:35] Speaker B: So I think they're. That's what's creating the uncertainty, which is another piece of. [00:12:39] Speaker A: The only thing that's certain is the uncertainty. That's for sure. I also just want to circle back around to our mortgage broker partner. He said that some builders are offering like a loan for the shortfall in between what the mortgage approval is and what they paid for it. And listen to this $75,000 loan for two years. It's not a mortgage. It's a loan that shows as a credit and the statement of adjustments to help people be able to close. And the problem is that that $70,000 loan, $75,000 loan is amortized over two years. And that's at 4%, which is about 3,400 bucks a month in payments. [00:13:24] Speaker B: You know how I just called those developers and builders opportunistic? [00:13:28] Speaker A: Yeah, yeah. What? Right, Exactly. So let's talk quickly about the price per square foot declines because they are notable. New construction peaked at on average 1689 per square foot. And that's Q3 of 2022. [00:13:45] Speaker B: And if I may also say, the market as a whole kind of fell off a cliff, so to speak, in Q2 of 2022. But for some reason, condos took a little bit while. Took a little while longer to fall. [00:13:57] Speaker A: So call it almost 1700 a square foot near the end of 2022 in the fall fourth quarter, the numbers that I have is Q4, 2024 is 1338 per square foot. [00:14:10] Speaker B: And are these numbers. [00:14:11] Speaker A: So it's even more. [00:14:11] Speaker B: Are these numbers what pre con is selling for? [00:14:16] Speaker A: Yes. [00:14:17] Speaker B: And is actually selling for? [00:14:18] Speaker A: Yes. [00:14:19] Speaker B: Okay, so then there is something else to note with these numbers. You know, in Q3 of 2022, the sales were through the roof. And all we keep hearing about pre Con right now is that we have the lowest number of sales. Like whenever there's headlines and people are like, condos aren't selling. Yeah, it's usually they're talking about pre construction. [00:14:35] Speaker A: Yeah. [00:14:35] Speaker B: Only 50 sales this quarter. Like literally only 50 units have sold. So I mean, I feel like this number is actually probably much lower if there were more sales to happen. [00:14:44] Speaker A: Yeah, well, that was a 21% drop. Some new projects are launching as low as 1151 and less, which still is. [00:14:51] Speaker B: Not a great deal if you think about the fact that the. You can go out and buy resale for. Under that. [00:14:57] Speaker A: Oh, for sure. Another thing to note is that investor demand for pre construction has hit rock bottom. [00:15:04] Speaker B: And that also is multifaceted. [00:15:06] Speaker A: Yeah, basically it's. There's a few different factors. Increased interest rates, decreasing rents, and there's no capital appreciation in the past investors, even though a cap rate on a property might only be 4%, which means if you're an investor and you put 20% down on a condo, you're going to be out of pocket with your mortgage payments, insurance, maintenance fees and, and, and taxes. [00:15:30] Speaker B: Taxes, yeah, but. [00:15:32] Speaker A: However, people didn't mind if the condos were going up 5 to 10% per year because they're getting capital appreciation. So you know, they're out of pocket. But if they were to sell in four or five years, knowing that, you know, it's, it's 10% per year compounded, they're, they're doing very well. [00:15:45] Speaker B: Well, they might be out of pocket. $5,000 in that year. [00:15:48] Speaker A: Yes. [00:15:49] Speaker B: But then they may have gained exactly 70,000. [00:15:51] Speaker A: So now the way that you're, you're so much more out of pocket with decreasing rents, increased interest rates. Interest rates. And then your property is actually going down in value. [00:16:02] Speaker B: So right now, hopefully that won't last forever. [00:16:04] Speaker A: Investors have kind of disappeared from the market. So then there's just no demand from those investors. What about. [00:16:09] Speaker B: What is it that Warren Buffett says to buy when. When buy the diplo. Yeah, I know. We're going to talk about opportunities. [00:16:17] Speaker A: Yeah. So buy the dip. Exactly. It's in. Who knows? You always try to buy the dip and time it, but you never really know. Exactly. Project cancellations. They're surging. In the first 10 months of 2025, only 714 new condos were sold in the city. [00:16:35] Speaker B: See, that's right. [00:16:36] Speaker A: That's crazy. That's down 61% from 1851 sold in the same period last year. [00:16:44] Speaker B: Oh, wow. [00:16:45] Speaker A: And it's down 86% compared to 2020. [00:16:47] Speaker B: Isn't that insane? Same. [00:16:49] Speaker A: Yeah. New construction sales are at the lowest quarterly level since 1995. July marked the weakest month when 54 units. [00:16:57] Speaker B: So I think that I pulled that out of. I must have read that from somewhere. [00:17:01] Speaker A: Yeah, yeah. So it's time. There's 57 months of inventory and pre construction. [00:17:06] Speaker B: So that is something to be very clear about. [00:17:08] Speaker A: Yes. [00:17:09] Speaker B: There is only like seven or eight months worth of inventory resale. [00:17:12] Speaker A: We'll talk about that. Basically that means it would take nearly five years at the current sales levels to absorb these units. [00:17:20] Speaker B: That's bonkers. [00:17:21] Speaker A: That's crazy. Another thing to note is that the amount of construction starts has just collapsed. Less than 500 units began construction in Q1 2025, 88% below the 10 year average. However, completions, let's talk about completions. They remain high. There's. There's 31,396 units that were expected to be delivered in 2025. So that's where. [00:17:52] Speaker B: Do we know how many? I guess we don't know how many actually were delivered, but delivered close to that. So can then we talk about how that affects resale and what it's doing to our resale market? [00:18:03] Speaker A: We can, we can as soon as we finish up just pre construction because I think there's really only one or two more things to go but. Well, let's talk about the takeaways. Okay, we talked about that. We've never really recommended pre con for quite a few reasons. I just want to show you this little chart. [00:18:19] Speaker B: Cheryl, show me the chart. John. [00:18:21] Speaker A: Here's our completions and also a little bit of information about one blue or west. You've got it there as well. [00:18:27] Speaker B: Okay. But you said I'm going to show you a chart. So I looked. [00:18:29] Speaker A: There it is. So there's your pre construction expected completions 2025. This is for GTA was 24,000. [00:18:41] Speaker B: So this is why everyone thinks that the condo market's going to start to recover next year. [00:18:44] Speaker A: Yes. [00:18:45] Speaker B: Because of the lack of completions. [00:18:47] Speaker A: Yeah, it's fallen off a cliff. There's nothing that has started for any buildings that would be completed in 2029 or beyond. And there's only like about 6,7000 of started construction completions for 2028, which is hardly anything. [00:19:04] Speaker B: And in this, especially if we have even modest growth in population. [00:19:10] Speaker A: Yeah. And another risk, one of the reasons why we said maybe to not consider pre construction is you just never know what's going to happen with the project. So One Bloor west. There was an article in the Toronto star last year. One Bloor west was an 85 story condo in Toronto. It was planned as Canada's tallest residential building. The Original developer went bankrupt Mizrahi. Thankfully Tridel took it over. Construction started in 2017. It's now expected to finish by early 2028. A court's trying to cancel 314 of the 329 pre construction sales to resell the units in 2026 at higher prices with luxury branding. And why does this matter? There was never any doubt that the building would be completed. But there's pre sale cancellations. The big casualties are where the home buyers, their contracts were voided after years of waiting money that was just sitting there that could have been working for them. So that's, that's kind of another reason. [00:20:13] Speaker B: Why 11 years for it to come to fruition. [00:20:15] Speaker A: Yeah. [00:20:16] Speaker B: And that's similar to YSL which is at the corner of Young and Gerard because they also went bankrupt and Concord took it over so. And actually not bankrupt. They just had some sort of weird stuff going. [00:20:27] Speaker A: Yeah. So here's some takeaways for pre construction. As we mentioned, we never really recommended it because of the speculative pricing. Project cancellations is another one. And there's a real world impact. We have quite a few of our clients who bought pre construction that just could not or did not want to float them after the fact they have come to completion. We've sold some of them. We did not represent them for their pre construction. They went either directly to the developer or they used a pre construction agent. And then we came along and did the sale after the fact and in many cases at a considerable loss. So there is real world impact anyway. So it's in a tough spot, that's for sure. And there's the huge paradox. While oversupply is super heavy, who knows what's going to happen. 27, 28, you said something. [00:21:19] Speaker B: And I don't know if you wanted to go into this about buying pre sale versus resale. You know with a pre sale project you're buying a floor plan resale, you're buying real. So that floor plan, you don't know if those finishes are going to be a good quality. You don't know if you know it's gonna be facing a certain way or into another building or if it's gonna have a big. What do you call those columns in the middle of one of your rooms or there's all these things or it's in small print. In most of the, most of the pre construction contracts that square footage doesn't have to match or you know, ceiling height. There's been tons of people who fought about ceiling heights, said I was going to have 10 foot ceilings or eight and a half feet, you know, and. [00:21:54] Speaker A: There'S a feel, big difference to it and. [00:21:56] Speaker B: Absolutely. And developers and builders are allowed to make those changes because it's in the small fence. [00:22:02] Speaker A: Yeah. There's a certain percentage that they could be a discrepancy. [00:22:05] Speaker B: So you're, you're rolling the dice a little bit with getting what you paid for or. [00:22:09] Speaker A: Yep, exactly. So let's talk about the resale market. [00:22:14] Speaker B: Okay. [00:22:15] Speaker A: So looking ahead, analysts predict continued weakness through 2026. Price declines, 25% plus from the peak is likely gradual recovery starting from like 2028. [00:22:29] Speaker B: Potentially 2028. Because I've also heard 2026 and I've also heard 2027. [00:22:33] Speaker A: Yeah. [00:22:34] Speaker B: This goes back to us talking about pretty much predictions. I mean, you just don't. There's too many moving parts that we can't predict. So I mean, Given the numbers 2027, this little chart that you have. [00:22:47] Speaker A: Yep. [00:22:48] Speaker B: Things seem to be quite a bit less obviously 2027, 2028, 2029, when there's less coming to fruition, that should help. Unless everybody starts trying to sell it once. [00:23:01] Speaker A: Yeah. Who knows? Like who knows? It'll be an interesting. [00:23:04] Speaker B: I think you can't predict demand. [00:23:06] Speaker A: No, of course you can. Well, let's talk about demand when it comes to resale. So part two, we're going to look at the big picture, check in on market temperature and also get into the stats. And then we're going to get into the how and why this is happening. Why is the resale market in such a bad place? Cheryl, what do you think? [00:23:27] Speaker B: Well, it depends. In 2023, before the whole, the market as a whole started to really feel a lot of pressure, we noticed that it was a tale of two markets that was starting to happen because all of these pre construction projects were coming online and as you had already mentioned, people couldn't afford them. And so all of a sudden our inventory levels started to climb and there wasn't enough demand for all this extra inventory that was coming on the market. That at the time combined with people waiting to see what the bank account Canada was going to do with interest rates. So people weren't coming off the sidelines yet because they wanted to see their interest rates come down. So we had buyers on the sideline, we have inventory growing and all of a sudden we were in this supply and demand opposite crunch. What is that? [00:24:12] Speaker A: Reverse crunch? Yeah. [00:24:13] Speaker B: Too much supply, not enough demand. [00:24:15] Speaker A: Yeah. [00:24:16] Speaker B: And then what happened in 2024 to the whole market is this uncertainty economic Uncertainty. So tariff talks is a big one last year. [00:24:23] Speaker A: Yeah. [00:24:24] Speaker B: Right. So geopolitical and economic uncertainty started to compress on the market as a whole. So yes, it's still a tale of two markets because we still have this pre construction, too much inventory, condo thing going on. But there's also the whole market is feeling that right now because everybody is wondering what's going to happen next because bank of Canada did their cuts as they said they were going to. And we now know that this is what we're working with. So generally speaking, had there not been that uncertainty. Uncertainty. I think that last year we expected a bit of a bounce back here. Not bounce back like all of a sudden we're going to have gains again, but more of a stable year in real estate. [00:25:01] Speaker A: A little more optimism. [00:25:02] Speaker B: Yeah. And that kind of stopped in its tracks Jan, Feb last year because of the tariff talks and did not stop. So we're still feeling that. And this is. We're going into a year where we're not expecting anything to change. Obviously hoping for some stability. [00:25:17] Speaker A: Sure. [00:25:18] Speaker B: But as you show me in this chart, there's more coming online in the next couple years. [00:25:23] Speaker A: And it's weird. There's. There is a tale of kind of two types of condos that are out there. You've got resale and new construction. We call it new construction is something that came to fruition very recently. It's like pre construction, but people paid so much for it and they've flooded the market with overpriced inventory because they're still trying to maybe not lose too much. [00:25:45] Speaker B: And this happened in 2020 as well with COVID It's exactly what happened in Covid. We had all these investors who their tenants had left. [00:25:51] Speaker A: Yes. [00:25:52] Speaker B: And they were trying to sell these units at really high prices. But it was flooding inventory into the market. And the people that actually were trying to sell their condos, it was a fact. Yeah. It was affecting them. [00:26:02] Speaker A: Investor demand for resale, we've talked about it has also hit rock bottom. We talked about investor demand for pre construction, but you know, it used to make sense. There was a lot of people that looked at buying maybe a second property if they own their home. They could buy a one bedroom condo, put a tenant in there and look at the capital appreciation, maybe subsidize a little bit. We talked about that. That that is just almost entirely dried up. [00:26:28] Speaker B: Yep. Doesn't seem like a good idea. [00:26:30] Speaker A: So. And as well, the people that maybe have owned for the last five years, 10 years, or even bought pre construction back in the, the late teens, it just doesn't make sense for them to be sitting on a depreciating asset while they are subsidizing. And so, you know, some people may be selling and you know, doing okay, but they're just, they're selling like they, they, they're cashing out right now. They, they maybe aren't taking a loss. They've owned it for quite a bit of time and they're cashing out because that money is probably better serving them in the stock market or some investments. So the demand has shrunk so much. [00:27:09] Speaker B: I forgot to mention that actually because in 2023 I said that that was part of the perfect storm that investors, a little bit the foreign buyers banned. A little bit of not allowing as many immigrants in because school is a big thing. Like we had rentals would go up every year when we'd have international students come in for school and rent these properties. Sometimes parents paying, so offering more than market value and all this stuff. All of that happened at the exact same time that these pre construction units were coming online. They were now new construction, flooding inventory, interest rates were still high, blah, blah, blah. So it was like this perfect storm. All these little things that have some effect on the overall market. Had a very large effect on the overall market. [00:27:52] Speaker A: Yeah. I want to give you an interesting stat here in 2022. And this is at the peak, approximately 38.9% of all condo apartment units in the. It's called the Toronto census metropolitan area. So when they do the census to find out how many people owned the properties, as an investor, it was Almost just under 40% were owned by investors. So not end users. [00:28:16] Speaker B: Yeah, there's our problem. [00:28:18] Speaker A: No kidding. So this figure represents the share of the entire condo stock that was investment property at the time, rather than the number of purchases with the resale market during that specific year. [00:28:28] Speaker B: So then one could say that resale. And we already know this resale. Part of the reason why it is slow right now is because obviously it's majority end users. And there has never been that large of an amount of end users. And all those other things we said too. [00:28:42] Speaker A: Yeah. Investors purchased a large majority of the new condo supply in 2022 and the new inventory added. 73% was investor owned. [00:28:53] Speaker B: So that's pre construction. [00:28:54] Speaker A: Yeah, well that's, that's new, new construction. [00:28:57] Speaker B: Right. [00:28:57] Speaker A: It came to first in 2022, but. [00:28:59] Speaker B: That was people who bought pre construction. [00:29:00] Speaker A: Yeah, yeah. [00:29:02] Speaker B: So this actually checks out because we have sold so many condos over the last couple of Years. I remember at one point I was trying to give our clients some sort of information to say, hey, the reason why it seems like there's so much inventory, because I went in and counted. Because I, as you do, because I like to count all of the tenanted units and all of the vacant units. Because a lot of the vacant units, like a large percentage are going to be tenants just moved out. [00:29:28] Speaker A: Yep. [00:29:29] Speaker B: And it was something like 70% or like some large number in the downtown core of properties that were sitting on the market and not selling. [00:29:39] Speaker A: And you know what? So much of the condo stock that was built from 2016 onward was targeted towards investors, not end users. Small. Yeah. Smaller condo units under 600 square feet. Two thirds were investment properties in 2022, so two thirds of those. It's crazy. [00:29:56] Speaker B: No parking. [00:29:58] Speaker A: Yeah. Global News has a quote here that investors who bought during the market peak in 2021 and 2022, when multiple offers were common and mortgage rates were below 2%, are now listing their properties for less than they paid and. [00:30:10] Speaker B: Yeah. [00:30:10] Speaker A: Not uncommon. [00:30:11] Speaker B: 100. [00:30:12] Speaker A: Yeah. For anyone that bought. Anyone that reaches out to us. And I've got a condo to sell. And we're like, when did you purchase it? If it's 2122, we know that they're going to be selling for considerably less than what they purchased for. [00:30:22] Speaker B: Well, we already know, because I talk about this all the time. Statsy McGee over here. I track condo sales in the downtown core. I track housing sales as well in some of the neighborhoods outside of the downtown core. So Turney, Bellwoods, Riverside, whatever. [00:30:35] Speaker A: Yeah. [00:30:35] Speaker B: But it's. I find that the stuff that I'm tracking in downtown Toronto reflects the larger market. And I have seen some selling for 2019, and I've even seen a couple 2018, 2018 prices. [00:30:49] Speaker A: That's wild. Yeah. [00:30:50] Speaker B: Yeah. I mean, the majority of it is still in this 2020, 2021 range. But, you know, it depends on the motivation of that seller as well. [00:30:59] Speaker A: We're seeing some fire. They're not really becoming fire sales. They're not as much an outlier. We're seeing more of them. [00:31:06] Speaker B: Yes. And not even. I wouldn't even know if you call them fire sales. Like, it is what it is. [00:31:10] Speaker A: It is what it is. This is the market now. [00:31:12] Speaker B: Exactly. But the thing is, is that that 2018 or 2019 buyer, they've had that condo for a while. They want to move up now. You know, maybe they've had a child, maybe they've moved outside of the city. So it's. It's a difficult situation for them to be in to go, oh, I've had this home for. And I can't, I have no equity, you know, so it's. [00:31:31] Speaker A: We, we spoke with someone recently as well that bought in 2021 and they're going to be coming up on their renewal. So renewal on five year terms starting in 2021 when interest rates were at sub 2% are now having to renew at 5. [00:31:45] Speaker B: So what's that going to do to the condo market? Is that why you're. [00:31:47] Speaker A: We might flood it even more. People may be in a position where they can't afford it. We have noticed that, that people are behind in payments. I know that gets tracked has ticked up considerably. It's low, but it's gone up like 100% from, you know, it may have been at less than half percent and now it's closer to like over 1%. [00:32:07] Speaker B: The reason why it's not higher is because of the stress test, I think. [00:32:11] Speaker A: Yes. So that was actually not bad during that heated market. [00:32:14] Speaker B: Everyone hated it. But it might be helpful for right now. [00:32:17] Speaker A: Yeah. At the end of the day though, people will always kind of need to buy and sell. Some are distressed, other are upgrading. Like every single person that's putting their condo on the market is, is a case by case. [00:32:32] Speaker B: Yes. [00:32:33] Speaker A: You know like 100. Yes. There's a lot of people that are wanting to sell and cash out. Yes. There's a lot of people, if they've owned from 2021, 22 that are in a tough position. If you see that they are selling. [00:32:44] Speaker B: Yeah. They might be willing to take something lower than. [00:32:47] Speaker A: Yes. Than what they paid for it. Yeah. And there's, there's a lot of negotiability. We know because we listed quite a few properties this year. This last year. There's nine so far, including condo towns. [00:33:03] Speaker B: And then we've worked nine condos. [00:33:05] Speaker A: Condos. Yes. [00:33:06] Speaker B: Yeah. [00:33:06] Speaker A: That includes condo towns. And we've worked with five purchasers. [00:33:10] Speaker B: Okay. [00:33:10] Speaker A: So we've, we've seen all different scenarios working with both buyers and sellers and you know, the market still moves. [00:33:19] Speaker B: And did we see. Because we had probably a similar number of homes that we sold. [00:33:25] Speaker A: Yeah. [00:33:26] Speaker B: Did we notice a difference? Like was there was condos more of a grind? [00:33:31] Speaker A: Yes. [00:33:31] Speaker B: Freehold. [00:33:32] Speaker A: Yeah, absolutely. Yeah. Would you agree? [00:33:37] Speaker B: I'd have to go and look at my list. Yeah, yeah. Yes, yes. Especially at the beginning of the year, the condos were struggling, which they'd been struggling since 2023 and it wasn't as hard with houses. But as the Year. As the years, as the months went by, the closer the end of the year we got, the more difficult it was for both. [00:33:55] Speaker A: Yeah. [00:33:55] Speaker B: I felt, all right. [00:33:57] Speaker A: What are some takeaways that you have for the resale market? I can tell you a couple that I have. [00:34:04] Speaker B: Well, go ahead. [00:34:06] Speaker A: There's opportunities, right? There definitely is opportunities. I think the buyers are being really cautious. We're seeing it. A lot of buyers, we found, even if they're getting good value that we've worked with. [00:34:23] Speaker B: Yeah. [00:34:24] Speaker A: And sometimes paying considerably less than what the sellers paid for the property. We heard one mention that they thought, what's going on? This. This is much too hard because we had to do some serious negotiating on a couple of different properties of. With some sellers that weren't willing, when we were representing the buyer, weren't willing to. To budge. And so the comment that we had was, why is this so difficult? I thought it was a buyer's market. [00:34:47] Speaker B: Yeah. It doesn't mean it's not difficult. [00:34:49] Speaker A: No, it doesn't mean. And we had multiple of our buyers say that. [00:34:52] Speaker B: I would say there were two buyers around the same time. Both, I think it was then we had to show that, hey, like, at the price that we're trying to negotiate here, it is a deal. [00:35:01] Speaker A: It's good value. Yeah. [00:35:04] Speaker B: Yeah, It's. It's interesting. I do agree that there's opportunities, but it's. It's not like buyers want everything to be 100% less, and sellers are holding on so tightly to a price that they want or need. And there's, you know, we've been talking about this for two years. Like, this has been going on for two years. So it's. Everything is. Is carefully curated, and everything is carefully negotiated. And it is a case by case basis, unit by unit basis, and person by person basis. Like, everything matters. There's so much nuance to the story. [00:35:35] Speaker A: Right now for any buyers or sellers or realtors out there listening. Just expect it to be a bit of a grind. Yeah. I think moving forward for 20, 26, I would. [00:35:44] Speaker B: What's a grind to you? Because I think that we hear a lot of this from agents who've been in the business for decades that a balanced market is where you have to talk to the other agents. [00:35:57] Speaker A: Oh, yeah, You've got to work. You don't just put a sign on the lawn. [00:35:59] Speaker B: Yeah, yeah, yeah. But from a buyer's perspective, even, it's not just like, you submit an offer and they're like, okay, how can you sign? You know, everything is. Is going to Be a communication between the two Realtors and to, as we always say, bringing together a win win. You want a happy seller who is looking to sell their home and a happy buyer who's looking to purchase that home. [00:36:17] Speaker A: Yeah. [00:36:18] Speaker B: So nothing on that has changed, but because of the heightened emotions and the, I guess, too many years of seeing Toronto real estate as an investment, all these other psychological impacts. [00:36:32] Speaker A: Yeah. For so many years, people have looked at real estate as, you know, investment. [00:36:37] Speaker B: Instead of a home. Well, you talked about the numbers here. [00:36:40] Speaker A: Tom Bosley said it at a recent meeting. He said you, you people, you kids need to learn that real estate isn't an investment. It should be a home. [00:36:49] Speaker B: I mean, we've heard it many times over the years. [00:36:50] Speaker A: We have. So I know a lot of people are still waiting for the bottom. Who knows when, when the bottom is. [00:36:57] Speaker B: Do you think we're at the bottom already? [00:36:58] Speaker A: Not quite yet. [00:36:59] Speaker B: Really? [00:37:00] Speaker A: No. I think. I think we'll remain a little bit stable. There'll be some ups and downs, but I think this year we may see a little bit more of a dip before we see our way up. I don't think it's going to be significant percent or two, but I don't think it'll be that significant for a buyer. If they see something they like right now, go for it. Don't, don't wait for a percent or two decrease potentially in the average condo, you know, resale condo. But I do think that we're nearing bottom right now. That's my take. What's your take, Cheryl? [00:37:30] Speaker B: I would love to say that I have a take. I think that there's too much uncertainty out there right now to even say what my predictions are. I hope there's stability this year. And when I see. That's so funny that you said we're still probably looking at prices coming down a percent or two. To me, that's stable. If we're doing a little bit of, you know, this ups and downs, and. [00:37:51] Speaker A: I think that's stable. [00:37:51] Speaker B: We finally met stability, and I'm hoping that that's what we kind of see. I think there's still a lot of fear for buyers to come off the fence, and I think there's still a lot of fear for sellers to sell. Is this the right time to sell? [00:38:03] Speaker A: I'm going to talk about sellers, like, in just a second. [00:38:06] Speaker B: But do you talk about the fact that sometimes we will say to a seller, it's not what price will you get? Is will you sell? [00:38:12] Speaker A: Will you even sell? Sure. [00:38:13] Speaker B: Right. That's That's a conversation we've been having for a couple years now. Yeah, I think that right now more than ever it's important to have that team that we talk about, you know, having that expert Realt, having that expert mortgage broker, lawyer, like all the people that. Because it's more of a communication and not just sign on the dotted line. Like you want to make sure you have people who are supporting you, professionals. [00:38:35] Speaker A: Giving you good advice and guidance moving forward. [00:38:38] Speaker B: Because it's not just like, oh my God, the condo market is crashing or falling. Whatever, I can go buy anything for whatever price I want. Like there's still market value. [00:38:46] Speaker A: Yeah, yeah. Hey, I meant to ask. We were sitting on the couch the other day and you were looking at the January stats for condo inventory and number of sales. That was an eye opener for me. It was only two weeks in and you said only. I can't remember how many units had sold. [00:39:04] Speaker B: Wait, you mean my daily tracking. [00:39:06] Speaker A: Yeah. [00:39:06] Speaker B: Where I said 63 units had sold so far halfway through the month. And last month, which was the lowest sales in eons, was already 108. [00:39:15] Speaker A: And this is for CO1 and C08. Right. [00:39:17] Speaker B: So the downtown core. So basically from let's say Hyde park to the beaches. [00:39:21] Speaker A: Yeah, yeah. [00:39:22] Speaker B: So under bloor. [00:39:23] Speaker A: Yeah. And so what, seven, eight, Eight months worth of inventory is kind of. Is what we're saying. [00:39:28] Speaker B: No, Well, I mean, because I've been trying. [00:39:29] Speaker A: We still have the rest of. We still have the rest of January. [00:39:31] Speaker B: If you double that number. Okay. So what I've noticed the last couple of years is that we have been floating between seven and nine months worth of inventory in the downtown core. This last year we every single month got a little bit lower. A little bit lower, A little bit lower. Partly because there wasn't as much inventory on the market, partly because there was a little bit more sales happening. So it was good. It looked like we were hitting a trend of, you know, maybe we're going to enter a balanced market soon. And in November, we were just over six months worth of inventory, which qualifies as a balanced market. [00:40:03] Speaker A: Right. [00:40:04] Speaker B: And then December was super slow. And right now January is starting off even slower. If you were to calculate the month's worth of inventory, I think it is like ten point something. [00:40:14] Speaker A: Yeah. [00:40:14] Speaker B: Like really, really high. [00:40:16] Speaker A: Well, we'll see. Go on. The January could pick up near the end. [00:40:19] Speaker B: Yeah. Well, also January. Exactly. January, spring market starts. Right. We start to see a little bit more activity. So if there is some activity that starts to happen, then hopefully our Numbers do what they did last year and the year before, and we start to get a little bit better. A little bit better. But right now, we talked about this. In 2022, a buyer's market with no buyers, it feels like. [00:40:43] Speaker A: Right. So it creates just stagnation. Feels just. It's like a. A crawl. And the market moves. But does it move slow? Yep. Let's talk a takeaway. How to sell a resale condominium in this market, because as we mentioned, we sold nine this last year in 2025. [00:41:03] Speaker B: Patience. [00:41:04] Speaker A: Patience. Pricing ahead of the market, which is hard. It's so hard when you look at the prices declining. If you're a little bit higher than market value and there's other units that are coming up and selling out from underneath you, then as you see the chart decline and you're above that line, you gotta price ahead of it. You gotta catch it before. And I know it's very difficult sometimes for sellers to process that to maybe price it less than the last recent sale. But in a declining market, that's where market value is heading. And if your price just a little higher, you might end up delaying your sale another two months, which. Which could see another decline in sales. So you kind of have to price it ahead of. Of a declining market. Very, very important. And when we meet with our sellers, we work with, you know, market value. When we do a comparative market analysis, we'll give conservative, realistic, and optimistic. And now optimistic is kind of out the window in many cases. Yeah. With regards to market value for what we think the property is perceived to be worth in today's market based on facts that. Facts and figures, recent comparable sales, comparable sales in the building, etc. Etc. So that's the biggest one. And, and. And also patience. [00:42:20] Speaker B: That's the one I just. [00:42:21] Speaker A: I know. So talk about patience. [00:42:22] Speaker B: No pricing ahead of the market. Why? I said it's hard. You hit the nail on the head that it's definitely. It's getting your sellers to. Getting a seller to understand that maybe this is where the market is headed. Right. So it's difficult not because it's hard to price something lower. It's difficult because the psychology behind it. [00:42:44] Speaker A: Yeah. [00:42:46] Speaker B: And so patience is definitely needed because it is taking so much longer for properties to sell. Like you said, things are still moving. They're just moving at a very slow. [00:42:54] Speaker A: Pace. [00:42:56] Speaker B: Being making sure your price is priced ahead of the market, which is sometimes a difficult pill to swallow. You want to stand out in the crowd. So that's done by price and by leaving no Stone unturned. So we've seen this so much over the last year. You know, a lot of agents now aren't staging as much because it's costing money and they're carrying properties for longer, which is costing even more money. So it doesn't make sense to them. But at the end of the day, buyers are still comparison shopping. So if you are priced well and you look better than everyone else, that's going to give you a Lego a better chance. [00:43:31] Speaker A: Yeah. [00:43:31] Speaker B: And if I can just talk a second about the pricing ahead of the market. Yeah, we had a client that I had discussions with this past year about. But aren't we going to get, you know, offers that are lower? And we knew from experience at that point that yes, both buyers and sellers, yes, most likely we will get offers that are lower. There are definitely some properties that sold and we were involved in these sales for list price. But you also need to get showings. And how are you getting showings? How are you getting that property in front of people? And that is by that lower price. So if you price a little too high, you might not, you might get overlooked and not even get showings. [00:44:08] Speaker A: Yeah, we saw that. [00:44:09] Speaker B: Until you have way many days on market and people then perceive you as needing to sell. Yeah, right. So it's like very strategic, thoughtful process in order to list a property. It's definitely not just choosing a price that you want and putting a sign on the lawn. And I would say this is not just for condos, this is for freehold as well. Like this is across the board and it's difficult. [00:44:34] Speaker A: You know, we've priced some of the properties what we thought were fair even ahead of the market and. But because days on market is so long and there's so much choice out there, you sometimes you'll be on the market 30, 60 days and all of a sudden maybe you're not priced as well as you thought you were because 30 and 60 days have gone. So you, it's, it's a, it's a really tough thing to do to price accordingly. We have in, in many cases recommended and help facilitate everything that gets involved with regards to marketing the property. There's, there's definitely costs involved if you want to make your property look way better than everything else and this way better. And this, this is a conversation we have with our sellers. And if you look at many of our properties, if not most are fully staged, it does depend on the type of property, depends on working with our seller to figure out the best approach if they're living there if they're not. [00:45:28] Speaker B: What their end goal is. [00:45:29] Speaker A: Exactly, exactly. [00:45:30] Speaker B: So yeah, there's a, again, like everything else is nuance and context and it's a case by case basis. [00:45:36] Speaker A: We're seeing a lot of properties being virtually staged now just because of, you know, 90 days plus, that's three months being on the market. Staging is usually charged for by the month. Sometimes virtual staging. A lot of agents are doing that. [00:45:50] Speaker B: I guess at the end of the day you just want to make sure that your condo or your property looks as good as possible so that it helps to make sure that you stand above the crowd. [00:45:59] Speaker A: That's right. In a tough, tough market, in order. [00:46:02] Speaker B: To sell, you want to look good price. Well, have patience. [00:46:05] Speaker A: Yeah. Pick a good realtor. [00:46:06] Speaker B: I just got to have an expert by your side. Same, same. So can I just say like we, we say what's behind the condo crash? There is not necessarily, we've come to this conclusion, a crash, but it's a difficult market right now and you have to go in eyes wide open. And it is what it is, it is what the market is. You know, people are still buying, people are still selling at a slower pace with lots more complications, but it can be done. So also if you're in position, a position where you need to or want to like, just make sure you collect all the information and there's new steps to be taken. [00:46:42] Speaker A: That's it. I'm going to do a quick little in closing. [00:46:45] Speaker B: Okay. [00:46:45] Speaker A: For sellers out there, just got to understand that hot markets which we had such an overheated market, 21, 22, they see corrections. Yeah, we understand and appreciate that the times are tough for a lot of people out there, especially if they bought in the last year, few years. For those in the need to sell position, it's important, as we mentioned, professional guidance and advice whether that be even renting a property out. If you're, you know, refinancing, selling, sit down, look at all the options with numerous professionals and find out what the best course of action to alleviate any pressure or to get you where you need to go. [00:47:26] Speaker B: I think yeah, you have to know where you want to go. It's not just a number or an amount, like it's what works best in your life. [00:47:34] Speaker A: Absolutely. If you are in the position that you're considering selling your condo, reach out to us. We're happy to have a chat. Now for the buyers out there, there's a lot of opportunities, especially for first time buyers who had been priced out of the market for a long Time, you know, when we were seeing 2030 offers on condos in 2021, it's 2022. Just wild. People just losing out. For those buyers out there going, I don't wait till we hit bottom. Have we hit it yet? It's hard to tell. We've lost 20, 25% from the peaks. I'm not sure if it's going to drift much, much lower than that. [00:48:11] Speaker B: But we know there's value out there. [00:48:12] Speaker A: There is value out there. We don't have a crystal ball. If you're in the position to be able to afford something and buy something right now, get, get the ball rolling. There's a lot of good opportunities out there right now. At the end of the day, make sure that you're working with an agent that listens to your needs, your wants, and comes up with a good action plan to get you into the market. [00:48:32] Speaker B: Can I talk about buyer opportunities for a split second? [00:48:34] Speaker A: Yes. [00:48:35] Speaker B: Because as you know, as I've mentioned many times already, I track the sales and we have been realtors for nine years. I have never seen so many 400 and $300,000 condos sell in downtown Core wild. They're all small and some of them are. Are crap. Don't get me wrong. They're not necessarily the best ones, but there are. There's a price point there that I don't think that we've ever seen as real tourism. We've been Realtors for almost a decade. [00:49:00] Speaker A: Yeah. Which is wild. So those are. Those are interesting opportunities potentially for investors out there. [00:49:05] Speaker B: Yeah. Yep. Where actual rents. Buying something with 20% down rents might actually make sense. Depending on the building, depending on the unit functionality, blah, blah, blah. You have here something about support. Local. [00:49:16] Speaker A: Yeah. So before we sign off, because that kind of brings us to the end of what's behind the condo crash. [00:49:23] Speaker B: Nothing and nothing. [00:49:26] Speaker A: We always like to do a shout out to a local business. Some lovely ladies that run Ayuda Massage. You want to talk about them, Cheryl? [00:49:32] Speaker B: They're lovely. Marian and Bailey. [00:49:34] Speaker A: Yeah. And there's also Sheila if you go to their website. So they're at Coxwell and Danforth, 1544 Danforth have. They're fantastic. Cheryl and I have been going to them for massage therapy for the last couple years now. Yeah. And they're. They're absolutely fantastic. So if you do get the chance, look them up. That's Ayuda Massage. A Y, U, D A. And that's about it. So I just want to thank you so much for joining us. If you haven't already. You can follow us on our socials, Facebook, Insta, YouTube, we're @j and Toronto Group. You can also find all of our previous podcasts on therealestatepodcast.ca. so until next time folks. Thank you Cheryl for joining me. I always love our spirited chats and debates and conversations. So if you can think of any new topics you'd like for us to cover, feel free to reach out. All of our contact information is on the right. Realestatepodcast ca. So I hope you have a great 2026. We're looking forward to working and meeting with many of you. Until then, take care. [00:50:42] Speaker B: Ciao. [00:50:45] Speaker A: You have been listening to TheRealEstatePodcast CA. Visit our website for more episodes and follow us on Instagram, Facebook and YouTube and cToronto group.