The oversupply of condos in Toronto’s real estate market will continue to weigh on overall home prices, according to TD Economics.
Rishi Sondhi, an economist at Toronto-Dominion (TD) Bank, said in a report Thursday that home sales in the Greater Toronto Area (GTA) “remain subdued” following the Bank of Canada’s move to cut interest rates in June.
Despite the relative weakness, the report predicts it is “only a matter of time” until sales growth improves, which is likely to extend into the resale condo market.
Sondhi said GTA resale condo supply continues to be elevated and a slower sales recovery is expected, meaning it will take time for supply and demand to reach a balance. Since the third quarter of 2023, the report said condo prices have fallen by around five per cent and “could post a further mid-to-high single-digit drop through the early part of next year.”
“Putting all the pieces together, condo valuations will likely continue declining, keeping home price growth in Toronto and (by extension) Ontario subpar through next year,” the report said.
“The result will be average home prices that record below-average gains in 2024 and 2025. However, there are risks to this forecast on both sides.”
Sondhi said that condo sales are expected to increase through next year as mortgage rates move lower, “thereby helping unlock what is likely a considerable pool of pent-up demand.”
He added that economic factors like elevated interest rates into next year and a softer job market are likely to “limit the upside activity” contributing to a slower sales recovery.
“At the same time, condo supply is highly elevated. The relatively subdued sales recovery means that it will likely take several months to soak up these inventories, and further price concessions could be required to facilitate the process,” Sondhi said in the report.