Market Notes: A condo market pullback?

As expected, this has been a big week for new listings. March break is over and the weather appears to finally be turning a corner. I have seen a good cross-section of listings come on the market this week. From renovated homes to handyman specials to even a coach house in High Park. Most properties are still holding offers as it remains a very competitive market downtown for freehold homes. Having said that, buyers are still being cautious and I am starting to sense a ceiling has been hit in the condo market. 

A pullback in the condo market could effect to downtown market dramatically, as it accounts for the vast majority of inventory in the core. Fortunately for condo owners and investors, interest rates appear to be remaining accommodative for at least the short to mid-term. In addition, the shortage of purpose built rental housing downtown also continues to be supplied by residential condos. I foresee a more ‘letting off the gas’ over the next 2 years in the condo market, which could create an opportunity in the near future. Over the long term, I am not concerned. As Benjamin Tal, the deputy chief economist at CIBC recently said at a Toronto real estate round table I attended; “If you think Toronto real estate is expensive now, wait 15 years!”  

A quick note on the new federal housing initiatives unveiled recently. As far as Toronto is concerned, the new CMHC interest-free loan will have little effect on the majority of the downtown market, as the average condo now tops $600K. This new ‘shared equity mortgage’ plan tops out at $480K, so some first-time buyers looking at bachelors and small 1BR condos are the only ones who can take advantage. In Toronto, this may help to prop up the entry-level condo market and possibly provide a ‘floor’ for any pull pack in pricing we may see in the near term.

-Nick Horton

Nick Horton, salesperson.