Condominium markets in some of Canada’s biggest cities have strongly rebounded this year, and analysts say the market could once again return to pre-pandemic red-hot conditions as rental demand surges and inventory is shrinking.

The condo market, which had been hot for years, cooled quickly last year during the pandemic as investors fled, spooked by the exodus of renters from cities to live with families or find cheaper places elsewhere. Short-term rental demand dried up and first-time buyers flocked to the suburbs and smaller towns to work from home.

This year, the rental market is rebounding on the prospect of white-collar employees and students returning to offices and universities and a strong bounce back in immigration. Younger buyers are also returning to condos after prices for bigger homes surged during the pandemic.

“Market confidence has rebounded very quickly,” particularly in Toronto’s downtown core, said Shaun Hildebrand, president of Toronto real estate research firm Urbanation.

In the second quarter, the downtown market made up the highest proportion of Greater Toronto Area condo resales in a decade, which “speaks to a renewed level of confidence, not only in the condo market generally, but more specifically in the downtown market,” Mr. Hildebrand said.

About 12,700 condos sold across the GTA from January to April, surpassing the 10,300 transactions ahead of the previous market peak in 2017. And while they fell following a March high, they remained 15 per cent higher than pre-pandemic levels. The average price per square foot for a resale condo in Toronto is $1,066 and for new construction condos its $1,104 per square foot.

Shrinking available supply is further boosting the condo sales market. Construction started on about 1,143 apartment and condo units in June in the Toronto area, down over a third from a year ago and almost half the level of two years ago. And while ongoing construction of condos was at a record 86,149 units in the second quarter, about 92 per cent of these were already pre-sold. The pullback in demand last year, combined with scarcity of land downtown, has dampened the launch of new projects, Mr. Hildebrand said.

“Developers are somewhat reactionary,” he said. “Now that demand for downtown condos has returned, we will see more condos launching.”