Canada Toronto

RE/MAX Turns Bearish On Toronto Condo Prices, Expects Declines Soon

One of the world’s largest real estate brokerages sees near-term risk for Toronto condos. RE/MAX weighed in on the recent market, and observed what a lot of people are seeing – a booming detached market, and a lot of condo apartment supply. The brokerage cites 3 drivers for this trend – urban flight, lower interest rates, and oversupply.

Urban Flight Leaving Poor Demand For Toronto Condos

RE/MAX is observing what a lot of markets have seen – urban flight. The brokerage notes people are leaving cities, and settling in rural communities. They cite the lockdown as one of the primary drivers of this trend. They believe this is due primarily to people looking for more space.

Although, this trend is across Canada and the US, even in cities where density isn’t a huge issue. That may indicate work from home is playing a bigger factor – decoupling employees from the city. Whatever the reason behind the trend, it’s leaving some cities with more condo supply, and weaker rental demand. Both are big negatives for a real estate market.

Low Interest Rates Fuel Buying More House

This is a trend driving people away from condo apartments you may not expect – interest rates. Falling rates stimulate home sales, but a unique dynamic is emerging. People are upgrading from condos into detached homes, faster than condos are absorbed. Additionally, credit became so cheap, so fast – it may have made more people skip the condo stage of the property ladder.

Greater Toronto Condos Are Seeing Sharp Over Supply

RE/MAX is seeing condo inventory rise due to both flight to the suburbs and interest rates spurring more detached demand. The firm cites a decline in short-term rentals, like AirBnB, collapsing as one reason. This has resulted in even more condo owners looking to sell or rent to long-term tenants. Massive amounts of building across the city further complicates this trend, with the firm warning “thousands more to come once new construction is completed over the next two to three years.” Further adding, “…condo prices, as well as rents, are expected to decline in the coming months.”

Generally, Toronto’s condo apartments are seeing a lot of similarities to other major cities across the world. During this pandemic, fewer people are looking to settle into high rise, city living. Instead, various reasons like larger budgets and work from home are helping people move to the suburbs. Toronto does have one major risk most other cities do not have right now – the most cranes in North America. Supply levels are expected to swell, at the same time fees for those units are also expected to climb.

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35 Comments

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  • Marc 1 month ago

    Condo prices are the inverse of maintenance. Maintenance and mortgage payments are so high when combined, it’s much higher than rent.

    • James Wilson 1 month ago

      Correct. If you’ve say on a condo board recently, you would know how the insurance was jumping even before the pandemic. It was only a matter of time before people realized the cap rates are subject to compression at every level.

      Now you have an investor based market, without a good proposition to invest.

  • Peter Drunken 1 month ago

    Landlords without land aren’t landlords. They’re speculators, subject to booms, busts, and squeezed by every level.

  • OM 1 month ago

    So this is why I think there needs to be more strict laws in place about real estate. Just in April RE/MAX agents were telling people Toronto condos were a great investment, because the city isn’t impacted. Now they’re changing their tune?

    Was someone suppose to buy in April and sell now on their bad advice, generating two commissions, and a lot of losses?

  • fred 1 month ago

    Bank of Canada may step in and give $100,000 free money to condo buyer to save the condo market.

  • Fight Back 1 month ago

    So many families suffering because of unaffordable home prices. We need a speculator tax in Toronto and Vancouver to bring down prices.

    But we all know the government is corrupt, we need to start a movement to punish real estate speculators.

    • john lavin 1 month ago

      You need to do your homework. The fees and charges the city imposes on new development are outrageous, I believe it is somewhere in the neighbourhood of $100,000 + .That is a big part of why home prices are unaffordable. Another reason is cuirrency printing which pushes up asset prices, again government meddling in the economy. The only part of your comment that bears any truth is about government corruption…………recommending a speculation tax only encourages more government corruption.
      Leave your envious mindset at the door and do your homework before you encourage irresponsible suggestions.

      • Terrance 1 month ago

        The fees are so high because property taxes are so low, and they need to pay for the rapid infrastructure upgrades to deal with high rise building.

        High development fees are a symptom of a building boom.

      • SH 1 month ago

        As mentioned, raise property taxes to roughly equivalent levels to most US cities. If you want the government to permanently prop up the housing sector to bail out speculators at the expense of workers, then it’s only fair that speculators contribute more to government coffers. Or do you just want the benefits without costs? Silly question – of course you do. We all do. But absent a magic money tree the cash has to come from somewhere and income taxes have reached their limit.

      • Pepp 1 month ago

        John I suggest you study economic 101. But I doubt you can get in a decent university. Speculator tax is the right way to bring down prices. These hoarders of real estate are like leeches, they are none productive member of our society who collect rent from productive people. They are a burden on society.

        Also, if real estate prices stay high so will land prices. Which is a much bigger cost input than your so called government costs. Lower prices equal more supply in real estate.

        • john lavin 1 month ago

          More marxist nonsense.
          I suggest if you really want to live in a marxist society you move to a country where that system is already set up for you…………..try China, Cuba, Laos, Venezuela…………I’m sure any one of them will welcome you with open arms.

          • Drago 1 month ago

            We’re more marxist then you’d think; government is purring money and creating unnecessary bubbles especially in real-estate. CHMC should stop insuring mortgages and let banks and private insurers take more risk in case of a default. CHMC was intended for veterans and it is not a given right. I’m wondering if they would do the same for stock market and back investors so they can invest a million dollars in stock market and see it grow? They should stop backing one sector so heavily and lower income & corporate taxes.

          • SH 1 month ago

            I love it when fake capitalists call people marxists.

            What would you call the CMHC? The shared equity scheme? The mortgage deferrals forced onto the banks by the government?

            Before he resigned, Bill Morneau said that the government has a responsibility to safeguard people’s house values. He actually said that.

            A true capitalist would want all that to go away to allow price discovery to occur in the housing market. But you don’t really want any of it to go away. You love government intervention when it helps YOU.

          • 123name 1 month ago

            I suspect that John Lavin is this John Lavin: https://activerain.com/profile/jlavin. Toronto RE/MAX Realtor commenting nonsense on a RE/MAX article.

        • john lavin 1 month ago

          Pepp…..I suggest you read “Economics in one Lesson” by Henry Hazlitt, probably the best book ever written on economics before you start to lecture me. Your solutions are ridiculous and without thought.

          • SH 1 month ago

            Henry Hazlitt was a committed free marketer, libertarian, and proponent of Austrian economics. As such, he would have been appalled and disgusted to see the depth of government intervention to prop up Canada’s housing market.

  • SH 1 month ago

    Just watch Trudeau enact a bailout for panicking overleveraged condo landlords. We all know it’s coming.

    Remember : Canada rewards speculation, not hard work.

    • Ted Brayer 1 month ago

      John since you are encouraging others to do their homework, and you are obviously in a state where you’ve done yours if you have time to comment “more nonsense” posts on a public forum, I would encourage you to post your analysis of the work you’ve done so we can all benefit.

      • john lavin 1 month ago

        Ted Brayer………….My comment of “more nonsense” was in reply to the comment sent to me noted below:
        “John I suggest you study economic 101. But I doubt you can get in a decent university. ”
        If they are going to insult me then I am not going to waste my time explaining my position further to them.

    • Dan 1 month ago

      So john your answer to the fact you love the house market being propped up by government is what read a book? Answer the question is it capitalism to allow government to prop up a market? We have seen asset inflation in houses because of widely low rates and no regulation due to government intervention and inaction. Canada has lax financial crime laws and that also floods our market with criminal money like the markham mansion casino owner who owns 50 other properties. Speculator tax is a great idea we need home prices to become normal and people to get put of this mindset house prices only go up.

      • john lavin 1 month ago

        Dan…….First of all I suggest you proof read your posts before posting them or have someone else who understands grammar and sentence construction do it for you.
        I am not sure where you get the idea that I “love” government intervention in the housing market, that could not be further from the truth.
        Let me be clear as I have stated elsewhere on this thread I do not advocate government intervention in ANY business or glad handing schemes.

  • Jimmy 1 month ago

    I hope this is nonsense but based on the action of government it doesn’t seem to be the case. A budget deficit worth at least 20 percent of economy. (Third worst in the world).

    Another 30 percent of the economy in assert purchases…

    I know we never want to lose but capital ism need both failure and profit. It seems like less effcient firms and individuals are being propped up. Failure is essential for capitalism.

    More government intervention will result in less efficient allocation of resources.

    Let’s hope this ends well some how.

    What happened to Blue?

  • Jimmy 1 month ago

    I hope this is nonsense but based on the action of government it doesn’t seem to be the case. A budget deficit worth at least 20 percent of economy. (Third worst in the world).

    Another 30 percent of the economy in asset purchases…

    I know we never want to lose but capitalism needs both failure and profit. It seems like less effcient firms and individuals are being propped up.

    More government intervention will result in less efficient allocation of resources. We have seen this movie.

    Let’s hope this ends well some how.

    (What happened to Blue?)

  • B&B Rentals 1 month ago

    Things are getting normal so its not quite surprising

  • john lavin 1 month ago

    SH…….Not quite sure how you conclude from my comments that I am a “fake capitalist”. I can assure you I am not. My only assumption is you must have forgotten to take your medication today.

    • SH 1 month ago

      As a capitalist, do you support abolishing the CMHC, banning central bank purchases of mortgage bonds, ending any future government props to mortgage borrowers like the deferrals, and ending government favouritism of real estate speculation by making housing subject to the exact same tax structure as other investments? Also need to ditch the shared equity scheme (which is bascially the federal government speculating directly in the housing market) and any first-time home buyer grant or at least equalize it with similar grants to be made available to non-home buyers.

      I could go on and on and I didn’t even touch on interest rates left artifically low largely due to housing debt. Canadian governments at all levels, especially the current federal government, basically exist to prop up the housing market. Unless you get behind proposals to end this toxic and incessant intervention and allow true discovery, one cannot take you seriously as a capitalist.

      • john lavin 1 month ago

        SH………Let me be perfectly clear, I do not believe the government should be involved in any business or glad handing schemes whatsoever. As for taxes I think they are basically theft. If you do not believe in government intervention as I do why then do you propose a speculation tax.

        • AyyLmao 1 month ago

          I have to agree with John on this.
          The problem with government intervention is people looking to the government to intervene, and when the results don’t work as intended well then we shouldn’t be asking for more intervention in any form. Taxation is theft, and we need to be careful to actually be asking the government to please tax the “the other guys” more because that just opens the door to more government taxing on all of us. The solution is clear and SH already pointed it out, abolish all the silly intervention to allow price discovery in a free market where the risk is real. Please guys, the last thing we should do is blame the government for intervening, by asking them to…well… intervene. Just get out of the way

          • SH 1 month ago

            The problem with your suggestion is that you’re asking the pro-Canadian forces (those who believe Canadian housing should be for Canadians, and that the system should reward work rather than gambling) to lay down their arms unilaterally, while you seem to give the anti-Canadian forces (realtors, central bankers, globalists) a pass. As long as the government, pressured by the anti-Canadian lobbyists, continue to prop up housing at the expense of ordinary people, it is logical for the pro-Canadian forces to push back legislatively and legally with new measures (speculation tax, etc). I wish for BOTH sides to let the RE market rise of fall on its own, but the anti-Canadian forces have the power here and the onus is on them to allow price discovery.

  • GT 1 month ago

    Why do people believe that water magically appears from the tap? Adding a new building in the middle of overcrowded city means expanding the capacity of water pipes, the wastewater pipes, treatment stations, electrical grid, electrical delivery and production, internet cables, garbage collection, streets, transport, and so much more.

    Adding another building next to the first building in the same overcrowded city means more pressure on the current infrastructure and this is all large cost. Building is the easiest part, supplying that building with resources is a very costly part.

    With the virus and with everyone now working from home, people are leaving that overcrowded city, the prices will drop below the cost of building, and the overcrowding will eventually end, as simple as that.

    Note: vaccines will start in a few months, and regardless if they are effective or now, people will have hope, rapid virus testing will also provide more hope, and things will start to recover in 6 months, or temporary recover in 6 months.

    Working from home is creating major issues, CRA website goes down now and then, TD Bank website has errors now and then, Google and Microsoft cloud systems fully go down, working from home is good but people are careless, and if this is not fixed in the next 6 months, companies will start calling people back to the office, but if fixed, working from home will be the new norm, and the offices will become condos as well, so the prices will go down a bit as well. Hard to predict

  • fred 1 month ago

    In Ontario they do less test so , they could show less infection to virus , the same in whole Canada , so they could open the border for immigrant to push real estate price higher.

  • john lavin 1 month ago

    123name………That is indeed me except it is not quite accurate, these days I am no longer a real estate agent. Why are you hiding behind an anonymous name, are you afraid to reveal who you are?

  • john lavin 1 month ago

    SH…………”Henry Hazlitt was a committed free marketer, libertarian, and proponent of Austrian economics. As such, he would have been appalled and disgusted to see the depth of government intervention to prop up Canada’s housing market.”

    Agreed

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