Understanding the condo market and if demand and values are rising, flat or declining can be difficult to figure out. There are plenty of opinions relating to new condo sales from a variety of sources (many who piggyback their information from each other) but when it comes to the resale condo market opinions tend to vary greatly.

The first thing you need to understand is that although there can be similarities in the makeup and trends in each of these markets by in large they are both quite different.

I consider myself a bit of an expert on condo sales in Toronto although condo sales make up about 40% of my total yearly property sales. Over the past 15 years I have sold hundreds of condominiums to buyers to live in as well as for investment purposes. I have sold both brand new condos as well as resale condos. The focus of this blog is going to be on resale condos and what the current and near future outlook holds.

First a little background- condominium living has for the better part of the past 5 years has become the first time buyer home in the central part of Toronto. Many buyers had been priced out of starter homes in downtown neighbourhoods or choose to purchase a condo over a dilapidated house in need of too many repairs and this surge in purchases of condos pushed forward the high demand of condo living today. Buyers wanted to get into the market but weren’t willing to spend upwards of $20,000+ in hidden upgrades (wiring, furnace, windows, etc) in the smaller older homes. Developers responded to the demand and the opportunity to make serious money and voila, here we are today!

So the demand increased and many of the downtown neighbourhoods started to flourish with a new sense of urban living starting to take shape across the city. Not only were first time buyers seeing the benefits of mostly hassle free downtown living, but people looking to rent also wanted in on the action. Developers started to pay attention to the investor segment of the market and marketing shifted to what we have today in many new buildings in central Toronto, which is a high proportion of investor units being purchased.

What starts out as new construction eventually becomes a resale unit and the resale market has been steady and flourishing for many years. Until now.

Still have your attention? Okay good.  So what do I mean by “until now”? Simply put supply and demand drive prices and activity. The supply side of condos has been rising in the resale market and sales on average are taking longer to complete. The demand is still fairly constant but with rising supply price growth is going to flatten and days on market are going to increase.

Sellers usually need to time to catch up to the market and in my experience although they may believe in the information I am providing them on where to price and where the market is heading, they typically feel it won’t hurt them to try at the higher price (or in some areas even at a lower price than sales 6 months ago).

Put aside for a minute the statistical facts of what defines a market – Sellers market is believed to be where sales to listings are 40% or greater, a balanced market when the ratios are 25% to 40% and a clear cut buyers market when less than 25%.

In many condo buildings in Toronto the recent ratios are saying balanced market.  Smart sellers working with knowledgeable agents will price accordingly and be fine. The others…who knows? But what happens when the stock continues to rise as more of the new condo completions hit the  resale market? What will this mean for resale prices?

A strong demand for rentals will help alleviate a flooding of the market along with the continued demand to live closer to where we work and play. Currently the vacancy rate for condos in Toronto is 1.3%. Low carrying costs combined with increasing rental rates make it attractive to hold onto these investments. These two factors will alleviate some of the pressure on pricing in the short term.

As for what will happen come spring of 2013 it’s still too early to tell and there are too many variable factors that can contribute to decline in both activity and price. My advise hasn’t changed much over the past 5 years. Buy smart (the right unit with the right features) and with a long term plan (both for owner occupied users as well as investors). I think the opportunities are better for end users currently but there still are some decent investment opportunities as well.