All is not well in condo land and hasn't been for a while.
Condo sales in the Greater Toronto Area last year hit their lowest level since the Global Financial Crisis amid a glut of supply and slowing demand.
Since then market demand has weakened even further, leading Toronto Dominion economists to cut what was already a bearish forecast.
They now predict that by the end of 2025 condo prices will have dropped 15 to 20 per cent from their peak in the third quarter of 2023, with about 10 percentage points of that decline taking place this year.
The forecast wipes out much of the gain condos made during the pandemic boom, but not all. TD expects prices to remain 5 to 10 percentage points above their pre-pandemic level even after the correction.
Challenges facing condominiums include slowing population growth as the federal government tightens immigration, along with growing supply.
The condo market is about 75 per cent investor-driven and rents for units are falling. Rent for the average one-bedroom apartment in the GTA was down 5 per cent year over year in the fourth quarter of 2024, said TD.
"Souring rent growth is likely turning off investors, with industry data suggesting that the share of homes being bought up these buyers is on the decline," said TD economist Rishi Sondhi.
Meanwhile, U.S. President Donald Trump's tariff war has thrown cold water on the housing market in general.
Toronto home sales plunged 23 per cent in April from the year before, as buyers, wary of an economic downturn, held off making major financial commitments. The biggest drop of all housing types was the 30 per cent plunge in condo sales.
2026 could bring a turnaround of sorts. TD expects the Bank of Canada to cut interest rates to 2.25 per cent this year, offering more relief to borrowers. Trade tensions should also ease, boosting buyer confidence.
The pullback in condo construction which started in the second half of 2024 could lighten supply pressures, said Sondhi. TD expects condo completions to fall below recent averages next year.
But even though "GTA condo market should enjoy a firmer year in 2026, chances of a heroic rebound appear slim," said Sondhi.
Trump's tariff war could well leave "scaring on the psyche of households and businesses," resulting in only a gradual and moderate turnaround in hiring and economic activity, he said.
Population growth is also likely to remain lower, which will curb rent growth and the attractiveness of condos as investment assets.
"Finally, condo affordability is likely to remain strained next year, weighing on the scale of any potential bounce back in sales and prices," said Sondhi. |
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New trade data confirms what airline ticket sales have been showing for weeks, say National Bank of Canada economists Jocelyn Paquet and Kyle Dahms — more travellers are shunning the United States.
Travel services exports, such as accommodations, meals and travel agency and education fees, paid by foreign visitors to America fell by more than 7 per cent in March, the worst drop in almost 25 years (outside of the pandemic lockdown). Over the past three months they have declined 10 per cent.
"We expect this new reality to have a negative impact on production and employment in tourism-related sectors, as well as on the financial results of companies that depend on foreign visitors," said the economists. |
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Canada is at an economic crossroads. The FP Economy: Trade Wars newsletter brings you the latest developments from the Financial Post and across the Postmedia network every weekday at 7 p.m. ET. Sign up for free here.
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Want to learn more about mortgages? Mortgage strategist Robert McLister's Financial Post column can help navigate the complex sector, from the latest trends to financing opportunities you won’t want to miss. Plus check his mortgage rate page for Canada's lowest national mortgage rates, updated daily.
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“Because of our long time history and allegiance together, it is a great honor to have the United Kingdom as our FIRST announcement. Many other deals, which are in serious stages of negotiation, to follow!” |
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— U.S. President Donald Trump announcing on Truth Social this morning that the United States had reached a trade agreement with the U.K. and promising others to come. Read more
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- The Bank of Canada releases its financial stability report followed by a press conference with governor Tiff Macklem and senior deputy governor Carolyn Rogers
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A B.C. couple in their 40s, Jennifer and Roland, wonder if now is the time to start investing in equity markets to help fund their retirement or if they should purchase a fourth rental property. Ideally, Jennifer would like to retire with Roland in 10 years when she is 50 and he is 60. They ask Family Finance, is it possible? Find out more
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FINANCIAL POST ON YOUTUBE |
Visit the Financial Post’s YouTube channel for interviews with Canada’s leading experts in business, economics, housing, the energy sector and more. |
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