Downtown condo markets in Canada’s biggest cities are in for a tough final stretch of 2020 and there’s little reason to believe that fortunes will shift quickly in early 2021.
RBC Senior Economist Robert Hogue recently wrote that urban condo markets are “the weak spot” in the country’s housing picture despite exceptional results seen in October at the national level. The strength last month was largely based on high-flying single-family home sales and price gains.
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And the outlook for 2021 remains challenging, according to Hogue, who believes downtown condo prices will decline further in the near-term as investors continue selling their units after being faced with declining rental cash flows thanks to a newly well-supplied long-term rental market.
“With immigration largely stalled and unemployment remaining high among lower-income Canadians, we see little that will boost rental demand in short order,” Hogue wrote.
In turn, soaring condo supply is leading to buyer’s market conditions, particularly in Toronto and Vancouver, he added.
But even with a bumpy road ahead, there are reasons to be optimistic. First, Capital Economics’ Stephen Brown wrote recently that the weakness in condo prices is unlikely to weigh on home prices at the national level.
Brown pointed out that the Teranet-National Bank Home Price Index — the gold standard in monitoring Canadian home prices — still shows prices appreciating in both Toronto and Vancouver, despite surges in condo listings.
“This underscores our view that, while condo prices could weaken, the downtown condo markets are too small to hold back national house price inflation,” he wrote.
Second, John Pasalis, founder and president of the Realosophy brokerage, told Livabl recently that the gradual reopening of offices expected in 2021, along with an uptick in immigration and student renters, should all be positive developments for Toronto’s downtown condo market.
And, it’s likely as the pandemic’s impact wanes that these anticipated changes will have similar positive effects in markets across the country too.