Transistor latch circuit - what's the capacitor for?
You are very close to being correct. C1 creates a time delay so the feedback loop has time to work. It also has a 'debounce' effect on a change in inputs, thus a predictable change in states.

Transistors are so fast that without a time delay the contact noise of your switch could make it toggle many times, resulting in an unknown final state.

In addition as Dave Tweed mentioned in comments C1 makes sure the circuit powers up in an 'unlatched' state by briefly keeping Q2 OFF.

C1 will also limit the speed at which the latch can change states, so a noisy input will not make the relay chatter.