Toronto’s condo market will not be able to reverse price losses this year as more new condo buildings are completed across the city even as demand continues to lag supply.
That’s the message from economists Tony Stillo and Michael Davenport, who in a research note published this week by Oxford Economics, forecast Toronto condo prices could fall between five percent and 10 percent this year.
The economists wrote that condo prices in the city have already fallen by 10 percent since last February, the result of a well-documented shift in housing preferences that could last beyond the pandemic itself.
Some market commentators have written that a swift recovery in the condo segment is on the horizon this year. Royal LePage CEO Phil Soper said in November that while condo prices would likely fall through the winter, by spring “we’ll be talking about impending supply shortages, even in condominiums.”
Stillo and Davenport aren’t so sure. A large number of condo completions are expected in Toronto this year at a time when supply is already significantly outpacing demand. There were a record-high 22,473 condos completed in 2020 across the Toronto region. At the end of last year, there were still 81,029 condos under construction, according to data released this week by Urbanation.
Even as the resale condo market showed some noteworthy signs of life in December, listings growth was still much higher than sales growth.
However, the trend that Stillo and Davenport fixate on in their research is how the COVID-19 crisis has accelerated “urban flight” — in other words, the movement of people out of large cities and into suburban and rural areas. The economists noted that net migration out of Toronto reached -54,000 as of July 2020, while migration to smaller nearby towns has rapidly increased, supported largely by a desire for more space and remote working policies.
This movement away from densely populated urban areas was already underway before the pandemic, so the pair believe it may not be quickly reversed once the pandemic’s effects on city life ebb.
They go on to write that even within the city, homebuyer preferences have shifted, with single-detached home prices posting an 11 percent increase since February, the same period in which condo prices recorded a 10 percent decline.
If you would like advice on your Real Estate decisions for the upcoming year, contact Stephen McDermott today.