Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Canada housing squeeze: Buyers moving up 'handcuffed' by hard-to-sell condos

Economic IndicatorsNov 17, 2020 11:10AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: Condo buildings line both sides of Gardiner Expressway in downtown Toronto

By Nichola Saminather and Julie Gordon

TORONTO/OTTAWA (Reuters) - Eager to move his young family into a house with a backyard amid the pandemic, Dale-Paul Jordan listed his Toronto condo for sale last month and prepared to start bidding on detached homes.

But the condo didn't sell or get a single viewing. And when another seller in the building slashed their asking price, Jordan and his wife pulled the unit off the market and decided to delay their dream until spring at least.

"One of the things we're handcuffed to is selling our condo to help with the downpayment," Jordan said.

The couple are among a growing cohort of would-be buyers in Canada keen to move up the property ladder, but are trapped by a flood of condos in the Toronto and Vancouver markets. The situation is only expected to worsen with a near-record number of new condos under construction.

The COVID-19 pandemic has sped up a flight to the suburbs, with big-city condo dwellers trading up to detached homes with backyards and home offices, mirroring trends seen in cities like New York and London.

Their spending power has also been bolstered by record-low interest rates.

But as more people find themselves in the Jordans' position, there will be fewer buyers for detached homes, real estate experts said, and that could have a trickle-down effect on the red-hot detached home market.

The cracks appearing in the condo market may well become the fault-line in Canada's housing market. The average home price in Canada has climbed 17% since October 2019.

"Many buyers of single-family homes are move-up buyers who are relying on the sale of their condo in order to climb the property ladder," said Vancouver agent and analyst Steve Saretsky in a note.

The average sale price of a detached home in the Toronto area is nearly 15% higher than a year ago, while condos have gained less than 1%. The widening gap is putting pressure on condo sellers trying to upgrade.

Indeed some agents say they have had clients on the brink of reneging on detached home offers, because of worries they won't be able to sell their condo.

"We came very close a few times but we got the deal done," said Thomas Mirkovich, a Toronto-based broker. "I had to have a lot of 'come to Jesus' moment conversations."

Add in other pressures - Canada's still-high unemployment rate, a sharp drop in immigration, and the winding down of mortgage deferral programs and emergency pandemic benefits - and conditions could be ripe for a reckoning.

"Now people can't sell their condos downtown. Nobody wants to buy a condo," Hilliard MacBeth, a portfolio manager and author of 'When the Bubble Bursts,' said in an interview.

"The government support means the real start of the recession has just been delayed."

WHAT GOES UP

Detached home sales in Toronto's suburbs surged from a year ago, while active listings are at their lowest since 2016. But in the city center, a cliff is looming, with listings doubling as sales slide, and 22,434 new units set for completion in the Toronto area in 2021.

The surge in condos for sale is partly driven by investors facing a dearth of renters amid lower immigration, job losses and the evaporation of short-term rental demand due to pandemic-linked travel restrictions.

Condos for rent in the Toronto area doubled in the third quarter from a year ago and rents have plunged.

Prices are still up on the year, but falling by the month.

Toronto real estate agent Scott Ingram said he recently helped a couple who had bought a house outside the city sell their downtown condo.

When they first started talking, comparable units were selling for around C$700,000. By the time they listed six weeks later, they had to settle for C$641,000.

Moody's (NYSE:MCO) Analytics forecasts that Canadian home prices will drop 7% in 2021, with both detached and condos falling. It sees Toronto area prices slipping to early 2017 levels and not fully recovering until mid-2023.

Ingram expects condo prices to continue to tumble as inventory piles up, and sellers who hold off may regret doing so.

"Today's cut rate may be tomorrow's good price," he said.

Canada housing squeeze: Buyers moving up 'handcuffed' by hard-to-sell condos
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email