The Toronto Condo Market has been a whirlwind this year. With condo listings skyrocketing, high mortgage rates, and sales dropping. It's looking like a very tough year for investors. So why are so many condo listings hitting the market? Let's take a look at why Condo Investors are ditching their inventory!
Cash Flow Crunch for Investors
last year, in 2023, Urbanation reported that out of all the condos that were completed and rented out by investors, a whopping 77% were cash flow negative. That means that the rent earned by investors was less than their mortgage payments, condo fees, and property taxes. To put it in perspective, this percentage is up from 44% two years ago. The first half of 2024 saw this number climb even higher to 81%.
On average, Condo investors who closed on their newly completed condos in 2023 faced a negative cash flow of $597 per month. It's a stark contrast to the slightly positive cash flow many enjoyed back in 2020.
Rents and Soaring Costs
So what about the renters? Last year, rent for newly completed condos in Toronto hit a record high, with an average of $2,700 per month, an 8% increase! While rent increased by 8%, monthly ownership costs (like mortgage payments, condo fees, and property taxes) skyrocketed by 21% reaching almost $3,250 per month.
Ownership costs for condo investors more than doubled the increase in rents. No wonder so many investors are feeling the pinch!
Breakdown by Condo Type
Wondering how different types of units fared? Here's a quick rundown:
Studio Units: Basically broke even, with cash flow neutral on average
One-Bedroom Units: Faced negative cash flow averaging $523 per month
Two Bedroom Units: Saw negative cash flow averaging $734 per month
Three Bedroom Units: Hit the hardest with negative cash flow averaging $866 per month.
If you're thinking about investing in a Toronto Condo, these trends are essential to keep in mind. The market is dynamic, and while there are challenges, understanding these patterns can help you make informed decisions. On the bright side, if you're looking to purchase a condo right now, there are plenty of deals to be had!
