t’s a safe bet that Toronto’s pummelled condo market won’t be rebounding tomorrow, or even by the end of the year.
Buyers are showing few signs of rushing to that market as prices slide, and even more inventory is set to come onstream in the months ahead – adding to the mountain of condo units currently sitting empty across the city.
There are plenty of reasons for that continuing buyer caution: the expectation that prices have even further to fall, potential lower mortgage rates down the line, and the suspicion that current prices still don’t offer value for money even despite their recent dip.
“I think what we have a lot of specifically in Toronto right now is supply in the smaller end,” Anne-Elise Cugliari Allegritti, Royal LePage’s vice president, research and communications, told Canadian Mortgage Professional. “So 500 or 600 square feet, maybe a one-bedroom or a bachelor. It may or may not have a parking spot. It’s not the most desirable unit.
“People are entering the market a little bit older. They have different needs. They might already be living with their partner or starting a family. Likely in this day and age, they need some dedicated space for working – so that size of a unit is not as desirable as it once was, even for a first-time buyer.”
That’s the bad news for those hoping Toronto’s condo market will start to recover soon. But a glimmer of optimism for that cohort, according to Cugliari Allegritti, is that the market won’t be in freefall forever – and a likely plunge in new construction and condo projects in the city will probably see that supply eventually picked up.
“By the time we get to the end of 2027, 2028, we know there’s going to be a lot fewer completions because there just haven’t been any new starts in the last year or so,” she said. “And we expect that will continue because developers are having a really hard time breaking even on those types of projects.”
A recovery isn’t imminent, but the crisis will have an endpoint
Canada Mortgage and Housing Corporation (CMHC) expects the market won’t recover until 2028 at the earliest. But Cugliari Allegritti warned condo buyers not to assume they have forever to make a purchase at the right price, even if it makes sense to wait out the market for now.
“There could be another year or so of this sort of sweet spot of opportunity for anyone who’s looking to get into a condo in Toronto,” she said. “But I can’t imagine it will last forever because we’ll get to a point where there’s just no new supply coming on the market.
“And once the economic outlook and consumer confidence bounces back, I think we’ll see investors start to come back into the market as well in that segment.”
First-time buyers still priced out of many property types
What’s more, the housing market across Toronto might not be booming, but sales have seen a recovery of sorts in recent months. Detached sales activity across the Greater Toronto Area (GTA) was up by 5.9% in August compared with the same time last year, while semi-detached sales rose by 2.6% and townhouse purchases increased by 2.4%.
And while prices have slipped from last year, they’re still well out of reach for scores of hopeful buyers, particularly those intending to purchase for the first time. Average detached sales prices came in at a cool $1.31 million in the GTA last month, while the average semi-detached price was $980,102 and townhouses came in at $860,178.
“It’s just more likely that a first-time buyer can get into a condo than anything else,” Cugliari Allegritti said. “So in other words, they don’t have much other option except for condos.”
CMP
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