Toronto real estate market is headed for a cliff

Condo supplies in Toronto will help drive home prices down further

Toronto real estate prices are headed for a cliff. The condo market will drag it further down according to the Canada Mortgage and Housing Corporation (CMHC).

“Anticipated increases in the supply of condominium apartments will lead to softening prices next year,” says the CMHC in an email to NOW.

Toronto home prices hit an all time high in June. But the CMHC has been warning that those prices will begin plunging in the fall. Unemployment and low immigration due to the COVID-19 pandemic are two main factors.

According to the CMHC, the lack of demand for oil on a global scale is another factor. Restricted mobility during the pandemic is leading to falling oil prices. That will further exacerbate the impact on oil-producing provinces and Canada’s economy. Extended mortgage deferral deadlines, lower mortgage rates and government stimulus packages are all meant to soften the blow.

Increase in Toronto real estate supply

According to the Canadian Bankers Association (CBA), more than 760,000 Canadians have opted to defer their mortgages or skip payments. That’s about 16 per cent among those with mortgages in bank portfolios.

There will be an increase in Toronto real estate supply from homeowners who can no longer defer mortgages. That supply will couple with inventory from the condo market fuelled partly by short-term rental restrictions during the pandemic.

“More units could also sit on the market longer as more buyers wait on the sidelines,” the CMHC says. They attribute that decline in demand to job losses and general financial uncertainty.

“A significant number of condominium units under construction (54,000 units currently) will make its way to the resale pool and will further increase supply.”

Condo rental market

The Toronto Regional Real Estate Board (TRREB) is reporting how hard the condominium rental market got hit in the year’s second quarter. According to TREBB, GTA realtors reported 7320 apartment rentals in Q2, which is down 24.8 per cent from the same time last year. Meanwhile, the number of rental listings were up by 42 per cent from last year.

“There are two key take-aways from the Q2 2020 rental market statistics,” says TRREB president Lisa Patel in a statement. “First, COVID-19 clearly impacted the demand for rental condominium apartments, due to restrictions on showing units and job losses across many sectors of the economy. Second, we saw the continuation of the pattern experienced over the past year, with year-over-year growth in rental listings far outstripping growth in rental transactions.”

Average condo rental prices also dipped to $2,083 for a one-bedroom and  $2,713 for a two-bedroom.

“Increased choice led to more negotiating power for renters, resulting in year-over-year declines in average rents in the second quarter of 2020,” says TRREB’s chief market analyst, Jason Mercer, in a statement.

Condo sales

Home owners can no longer use Home Equity Line Of Credits as down payments on investment properties. WE Realty broker Odeen Eccleston tells NOW that the new CMHC rule will reduce the pool of potential buyers.

Re/Max Hallmark Realty broker Meray Mansour adds that declines in condo demand will be felt more outside of the central core. She says highly saturated areas like Yonge and Eglinton are also vulnerable. Mansour adds that COVID-19 is forcing people to spend a bulk of their time indoors while trying to keep social distance, so elevators and a lack of outdoor space has made condos less appealing.

However, the average condo sale prices still managed to rise by 5.1 per cent year-over-year to $619,707 in Q2, according to TREBB. That increase occurred while listings were down 21.6 per cent and sales dropped 50.8 per cent year-over-year.

TRREB has also reported that city council has approved a plan to create more housing opportunities in Toronto. TRREB is specifically pursuing options that fall between detached and semi-detached homes and condos.

Toronto real estate right now

Odeen Eccleston has observed an exodus from the city inspired by COVID-19. People who are working from home are now swapping out their expensive Toronto real estate for cottage country.

“They can get so much more for so much less in a lot of these cottage countries,” says Eccleston.

But for now, Eccleston and Mansour say the heat is still on in the Greater Toronto real estate market.

“In the 905, especially in the below $700K price range, its still on fire,” says Eccleston.

“I’ve even sold a few condos with multiple offers in the Beaches and surrounding areas,” Mansour adds. She notes that some condos remain appealing despite the trends. “In areas like the Beach and Leslieville, or places where condos are more low-rise loft or boutique style, the demand is still there. Especially condos with really large terraces.”

Both realtors are cautious of the impending downturn. However, they wonder if Toronto’s real estate market can whether it better than expected. For now, they’re telling sellers to be safe and act now before we reach that cliff.


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14 responses to “Toronto real estate market is headed for a cliff”

  1. Reading NOW Magazine (a division of The Communist Star) to glean real estate wisdom is like trying to find a romantic comedy written by Stephen King.

  2. Toronto’s real estate market desperately needs a burst bubble adjustment. But I will believe it when I see it so here’s hoping.

  3. CHMC is the last source I’ll trust regarding market conditions. Secondly the banks and mortgage companies are all reporting that mortgage deferrals are down to just 6% of thier overall portfolios. Instead of just copy and pasting what they say you should do some research for your article. Recent condo launches have shown continued interest in new builds, 38 Eastern had over 1500 reservation requests for units just a month ago, Westport Condos at an unprecedented $900+/sqft for Port Credit is almost sold out in a couple weeks. 199 Church Condos just launched at @$1500 a sqft, they are selling as well. What we are seeing is the result of poor business planning. All the Arbnb owners who were not wise enough to take the money they were making hand over fist and put some away for a rainy day, they just kept eating at the trough, now it’s empty, they have to sell. Boutique buildings, low/mid rise buildings are all seeing increased interest and listings selling in multiple offers. It’s more like a hill not a cliff, another Now headline that has no truth to it.

  4. What nonsense, condos are not seen as less attractive during covid – wheres the source for that statement?

    Seems more the author wrote their own opinion and is trying to claim it as a fact.

  5. This is one confusing article. Don’t bother reading this stream if conciousness nonsense if you haven’t already.

  6. I’m told the cmhc head also enjoys yelling ‘fire’ in crowded theatres when his warnings re the real estate market don’t generate the desired impact. On weekends he likes to gift empty boxes to orphans. The guy has a weird sense of fun

  7. Just another fake news, this was said 20 years ago, nothing happened, prices doubled and more, and I’m still waiting ….
    You learned nothing from the past .. sorry for you

  8. Wondering if this analysis is wrong. Will people working in Toronto prefer to purchase condos closer to their workplaces to avoid public transit which is abominable at the best of times.

  9. Oh my god. I was told the exact same story when I bought my semi in the beaches 15 years ago. $475,000 for a semi! In the beaches! It will go down to $275,000, and I just bought in the biggest real estate bubble in history! Fifteen years later it’s worth a million more than I paid for it! So glad I listened to drivel such as this. Look at London! Look at other markets around the world. We love to talk that we are a “world class” city, yet we still listen to this rubbish. Oh the Toronto market will crash, and everyone’s real estate will be worthless. Run for the hills. Wake up. These articles are small town Toronto fear mongering.
    Like Toronto is going to up and move and no one will live here, so better not buy any real estate. Just like Toronto architecture, don’t build anything nice, cos we are not staying for long. Toronto just surpassed Chicago in population. So after Mexico City, New York and LA it’s the next biggest in North America. So what direction do you think real estate prices are going? Definitely toward a cliff.

  10. The way I see it, the pandemic will last for a number of years. Most high-paying employers (finance, banking, accounting, lawyer services, software, medical – telehealth, etc.) will have adopted a full work from home strategy. As employees will be accustomed to it, they will demand/prefer it. You will see commercial real estate plummeting as there is too much risk bringing employees in. At the same time, employees are able to demonstrate they are just as efficient from home as conventionally coming into a workplace. You will see a depopulation of the city centre as people start to spread out and look for cheaper real estate. Condos will become terrible investments as for years developers were building compact 1 bedroom condos with no foresight to families. Real estate will start capitulating as our economy shrinks as we move further into a global recession (retail, restaurants, travel, small business closures, etc.).

    You can already see the influx of condos for sale in the Toronto market (look at Albeit they are a bit disillusion, pegging their 1 bedroom condos at $550,000-$600,000 regardless of location. Let’s see how long they can holdout as each month goes by and more condos flood the market. It’s just a waiting game.

    To say we are not in a bubble is LOL. Do you really believe that a detached home in the GTA should cost $1 million dollars? It’s ridiculous through financial instruments that Canadians were able to borrow debt on debt (e.g. HELOC, low interest rates) and use to speculate/invest in real estate to bid it so high that anyone entering the market with no financial support from mom & dad cannot even afford to buy a condo. It’s probably the biggest misstep in Canadian history – affordability of homes despite having all this land. I get it, city hubs that have all the jobs but the pandemic will show that you can work from home anywhere in the country and just be as productive.

  11. Sure, let’s all leave the city, all 3 million plus to go to cottage country because it’s so quiet. When you are in your home, it doesn’t matter what is is, house, condo, rental. You are indoors. Try going to a Costco, or a Walmart or any big box store in the exurbs or cottage country. All I see are crowds, parking lots, and lineups. So much safer and peaceful. What dribble. The city is the city. People need and will always want to be here. What dribble.

  12. The Article makes logical sense. In a city/country where the average family income is $61000 – $79000, houses shouldn’t cost this much….regardless of how “First class” a city is.
    The issue is that people like to get information from headlines, and get high from the dream of being very rich. Headlines supplied by the Real estate cartel. Few do get rich, and some make money, but for the most part, people are slaves to their house/bank.

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