Is the Toronto condo market going to crash?

[Viking]

I am watching the condo market in Toronto. Specifically the new-build market. It is now clear that the increase in prices for new-builds from 2015 to 2022 was a bubble. The questions I have:

1. Does the air come out slowly (like it has been) or does the decline get a little more unruly?
2. Does the issues in the condo market impact the larger real estate market?

Vancouver has the same issues, just on a much smaller scale. 

 

I have been following the guy in the video for the past couple of years. He has been a great resource. He has nailed what has been happening. 

 

A generation of new-condo ‘investors’ are in the process of getting cleaned out. They are going to learn the age old lesson: Leverage is a wonderful thing when the bubble is forming. But it is catastrophic/death when the bubble pops. And it is popping for new-builds. The question is if the damage is contained to new-builds or if it spreads.

 

 

Edited April 19, 2025 by Viking

[SafetyinNumbers]

1 hour ago, Viking said:

I am watching the condo market in Toronto. Specifically the new-build market. It is now clear that the increase in prices for new-builds from 2015 to 2022 was a bubble. The questions I have:

1. Does the air come out slowly (like it has been) or does the decline get a little more unruly?
2. Does the issues in the condo market impact the larger real estate market?

Vancouver has the same issues, just on a much smaller scale. 

 

I have been following the guy in the video for the past couple of years. He has been a great resource. He has nailed what has been happening. 

 

A generation of new-condo ‘investors’ are in the process of getting cleaned out. They are going to learn the age old lesson: Leverage is a wonderful thing when the bubble is forming. But it is catastrophic/death when the bubble pops. And it is popping for new-builds. The question is if the damage is contained to new-builds or if it spreads.

 

 

I’m watching not that closely because cap rates are still so low and the culture of ownership Is still so strong. I have been renting in Toronto since 2008 so I know I’m bad at market timing. 

[SharperDingaan]

If you are a family looking to buy a starter home, 9-months out you're probably going to have better prospects. If you're an investor with a small unit, it's probably going to get worse as pre-build investors discover that they can lose more than their deposit. If you have a 2 or 3 BR you are probably just going to tread water as your condo fees are too high. 

 

SD 

[Gregmal]

Also somewhat important to define “crash”. 10-20% from COVID ATH prints? Listing prices getting cut? Or like 50% drawdowns from a blended FMV? 

[Spekulatius]

A crash is 20%+ IMO.

 

Most RE corrections are less than 20%. What can easily happen is a 10% correction and the price just sit there for a couple of years doing nothing. that can be tough if you are a RE investor and your property isn’t cash flow positive and very much feels like a crash.

[mcliu]

Rent and sold prices are already down 15% from the peak but still quite pricey relative to incomes.

[Gregmal]

I’ve owned plenty of properties where you buy it and for years there’s no discernible evidence of any price appreciation. But that’s not generally why anyone buys in the first place. During the tenure of ownership you build equity and if a primary or second home you get enjoyment out of it. Year 7-10 is where you start having tax efficient financing options.

 

The worst approach to RE one can take is viewing it like a stock. Transaction costs alone round trip are like 10%, so if that’s how you’re gonna approach it you’ll learn an expensive lesson very quickly. So a 10-15% price movement should be more or less immaterial.

[Viking]

In the downtown core of Vancouver today nominal prices of condo's (per square foot) are getting close to where they were back in 2018. Same with single family houses in the West part of the city (Dunbar area) where I currently live/rent.

 

If inflation was zero, then looking at nominal would be useful. But inflation since 2018 has been significant = about 20% in Canada. So if nominal prices are flat over the past 6 years, that means we have had a 20% correction in real prices = bear market decline. And given the current situation in Canada (high level of economic uncertainty/slowing economy) demand for real estate has fallen off a cliff (historic lows) in what is usually the strongest part of the year for real estate. At the same time, supply is growing (spiking when it comes to condos). Months of supply is ballooning higher. 

 

My base case is prices continue to move sideways (perhaps come down a little) in nominal terms and inflation continues to run at 2.5 to 3% over the next couple of years. In real terms, perhaps prices come down a total of 25% or 30%. The key for Canadian real estate over the next year will likely be the path of the economy. 

Edited April 20, 2025 by Viking

[Gamecock-YT]

 

13 years when the talk first began and 86 pages of posts......and this time is different? A good sentiment check at least.

[dwy000]

38 minutes ago, Gamecock-YT said:

 

13 years when the talk first began and 86 pages of posts......and this time is different? A good sentiment check at least.

I moved from Toronto 28 years ago and at the time they were in an existential crisis over whether condo prices were in a bubble.  

[Milu]

2 hours ago, Viking said:

In the downtown core of Vancouver today nominal prices of condo's (per square foot) are getting close to where they were back in 2018. Same with single family houses in the West part of the city (Dunbar area) where I currently live/rent.

 

If inflation was zero, then looking at nominal would be useful. But inflation since 2018 has been significant = about 20% in Canada. So if nominal prices are flat over the past 6 years, that means we have had a 20% correction in real prices = bear market decline. And given the current situation in Canada (high level of economic uncertainty/slowing economy) demand for real estate has fallen off a cliff (historic lows) in what is usually the strongest part of the year for real estate. At the same time, supply is growing (spiking when it comes to condos). Months of supply is ballooning higher. 

 

My base case is prices continue to move sideways (perhaps come down a little) in nominal terms and inflation continues to run at 2.5 to 3% over the next couple of years. In real terms, perhaps prices come down a total of 25% or 30%. The key for Canadian real estate over the next year will likely be the path of the economy. 

Yes it would be very interesting to see an inflation adjusted price chart for Toronto or Vancouver real estate over past 50-60 years. 

[John Hjorth]

On 4/19/2025 at 7:24 PM, Viking said:

I am watching the condo market in Toronto. Specifically the new-build market. It is now clear that the increase in prices for new-builds from 2015 to 2022 was a bubble. The questions I have:

1. Does the air come out slowly (like it has been) or does the decline get a little more unruly?
2. Does the issues in the condo market impact the larger real estate market?

Vancouver has the same issues, just on a much smaller scale. 

 

I have been following the guy in the video for the past couple of years. He has been a great resource. He has nailed what has been happening. 

 

A generation of new-condo ‘investors’ are in the process of getting cleaned out. They are going to learn the age old lesson: Leverage is a wonderful thing when the bubble is forming. But it is catastrophic/death when the bubble pops. And it is popping for new-builds. The question is if the damage is contained to new-builds or if it spreads.

 

20 hours ago, Viking said:

In the downtown core of Vancouver today nominal prices of condo's (per square foot) are getting close to where they were back in 2018. Same with single family houses in the West part of the city (Dunbar area) where I currently live/rent.

 

If inflation was zero, then looking at nominal would be useful. But inflation since 2018 has been significant = about 20% in Canada. So if nominal prices are flat over the past 6 years, that means we have had a 20% correction in real prices = bear market decline. And given the current situation in Canada (high level of economic uncertainty/slowing economy) demand for real estate has fallen off a cliff (historic lows) in what is usually the strongest part of the year for real estate. At the same time, supply is growing (spiking when it comes to condos). Months of supply is ballooning higher. 

 

My base case is prices continue to move sideways (perhaps come down a little) in nominal terms and inflation continues to run at 2.5 to 3% over the next couple of years. In real terms, perhaps prices come down a total of 25% or 30%. The key for Canadian real estate over the next year will likely be the path of the economy. 

 

Lars [ @Viking ],

 

Related to generational and estate planning, or are your following this from a general investment point of view, or your wife and you considering a second home? 

[Spooky]

I've put figuring out the Canadian housing market in the too hard pile. It mostly comes down to estimating supply and demand which are both increasingly political issues. Will the federal government restrict the number of new people coming into the country? Will there truly be an infrastructure project to build millions of homes?

[Viking]

21 minutes ago, John Hjorth said:

 

 

Lars [ @Viking ],

 

Related to generational and estate planning, or are your following this from a general investment point of view, or your wife and you considering a second home? 

 

@John Hjorth , I am following the real estate market for a couple of reasons:

1. Canada has had a housing bubble. It was the economy here from 2010 to 2022. Where it goes from here will have important implications for Canada's economy.
2. My wife and I sold our house in 2021. We are happy renters today. If prices in Vancouver came down that would tilt the calculus a little more in favour of owning. Nothing imminent. But I am open minded.
3. I have three kids who are all 20 to 25 years of age. Today, they all want to live in Vancouver. If real estate comes down in price, we might get a generational buying opportunity here in Vancouver. If that happened we might help our kids out (not sure what that help would look like).  

I view any real estate purchase not as an investment. I am good at compounding financial assets. Even at lower prices, any real estate purchase would likely deliver sub par returns (compared to what I can earn in financial assets). So a big consideration for me is how much of my portfolio I want to put into an asset (real estate) that is likely to earn sub-par returns moving forward.

 

Yes, that is a first world problem. But I do need to be careful not to over-reach (and take my current financial situation for granted). Having said that, I tend to be too cautious when it comes to real estate - and that is because it is not how I am wired (from an investment perspective). 

 

Bottom line, real estate in Vancouver is on my radar. Nothing is imminent. But I am trying to be inquisitive and open minded. Perhaps a fat pitch comes along. Perhaps we are already there and I just don't see it (that too conservative thing). 

---------

PS: The generational estate planning thing has been going exceptionally well. I plan on doing an update on this topic. Real estate is an emerging topic...

Edited April 21, 2025 by Viking

[John Hjorth]

Thank you for the elaboration, Lars [ @Viking ].