The sector’s years-long downturn doesn’t seem set to end in 2027
Mortgage and housing market watchers have been waiting for years for Toronto’s beleaguered condo sector to finally gather pace – but a 2027 recovery doesn’t look to be in the cards as buyers continue to snub the space.
October saw yet another decline in condo sales and prices, and while many mortgage brokers working in the city see some opportunities for buyers among other property types, the familiar problems plaguing the condo market seem likely to persist.
Mike Kazarian (pictured top), a Toronto-based mortgage broker with Lenders’ Choice Mortgages, told Canadian Mortgage Professional he’s still been hearing of potential condo buyers facing financing challenges – and he doesn’t expect the market to see any improvement when 2027 comes around.
“I think the outlook for condos is still bad,” he said. “It’s going to be two or three years because the population growth has basically plummeted. If that continues, there’s a lot of inventory right now and a lot of the preconstruction builders are doing fire sales.”
A new federal government initiative to accelerate permanent residency for workers already living in Canada has changed the immigration picture slightly over the past week, although RBC Economics doesn’t see the change having a significant impact on housing – for now.
“Given the abundance of inventory in the housing market, a modest acceleration in population growth doesn’t introduce substantial risk to affordability near-term,” RBC economist Rachel Battaglia said in a report this week. “That said, this could quickly change as existing pent-up demand is unlocked.”
While end users and first-time buyers are still avoiding the condo sector, recent months have seen some interest emerge among bigger investors including Jesta Group, a global real estate firm that reportedly earmarked $500 million worth of Toronto condos for investment earlier this year.
Kazarian said he sees that trend continuing. “I think you’re going to see a lot of REITS [real estate investment trusts] and big companies come in and buy these condos for purpose-built rentals,” he said.
“And look, we need rentals in the city. We need to make it more affordable, but that’s not going to help out the mortgage business and people looking to buy.”
Lower prices could spark a better homebuying outlook elsewhere
One possible bright spot for the condo sector: the federal government’s recent announcement that it intends to amend the ban on non-resident foreign buyers, extending that restriction into 2029 but loosening it to exclude the purchase of newbuild homes.
Some analysts say that decision could open the door to foreign investment in the preconstruction sector, potentially putting a floor under the market’s years-long correction.
Still, it remains to be seen whether that drums up enough interest to get the market moving again – especially for microunits, the now-notorious sub-500-square-foot condos built for renting but seeing little to no interest among potential buyers who want to live in the property they purchase.
Prices have been sliding across the board in Toronto, and outside the condo sector Kazarian said he sees reason to believe homebuyers will continue to snag deals and find the right purchasing opportunity in 2027.
“I think a lot of people are going to be cautious [next year], but on the flipside of that housing prices re coming down. We’ve seen, across the GTA [Greater Toronto Area], an approximately 21% decrease in housing prices [since their 2022 peak]. So is now a good time to buy? It might be.”
Trade, inflation concerns linger as 2027 nears
Other clouds are continuing to hover over the housing outlook, though – including trade tensions with the US and the continuing US-Iran war, both of which have sparked economic fears.
The Iran war has pushed up fuel prices and raised fears of Bank of Canada rate increases caused by inflation pressure, while the ongoing trade turmoil has spiked concerns about job losses and layoffs in tariff-impacted areas.
The issue of job security is one that frequently rears its head with customers, according to Kazarian. “I’ve seen many clients where they’ll take the position that they want to make sure they can quality for the mortgage based on one income versus both because they’re just being cautious in the event that one of them loses their job,” he said.
“So I think the market will pick up, but people are going to be cautious and they’re going to be selective. I don’t think we’re going to see any kind of multiple offer situations, but I think it might be a good time to buy.”
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