ECONOMIC SPOTLIGHT // Q3 2024
The Canadian economy is navigating a period of transition, marked by a shift in per-capita GDP since mid-2022. While this period echoes past economic cycles, it also presents opportunities for adaptation and growth. The Greater Toronto Area (GTA) condo market is facing considerable pressures, yet these challenges also provide a chance for strategic reassessment and potential long-term gains. Meanwhile, the low-rise market remains relatively steady, supported by limited inventories and favorable mortgage rates. The current slowdown in condo activity offers a valuable opportunity to explore new strategies and innovative solutions for future success.
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The condo market currently grapples with high property prices, stagnant resale values, and elevated interest rates, deterring many investors. Developers are constrained by high construction costs, which limit their ability to lower prices. Despite these challenges, there are signs of stabilization as construction costs level off and interest rates are projected to gradually decrease. This potential easing of financial pressures could help realign condo prices with market demand, fostering renewed interest from investors.
In addition, population growth policies, such as caps on international students, are expected to slow growth in 2025 and 2026. This may alleviate some rental market pressures. Despite the current economic landscape, new condo prices have only seen a modest 5% dip from their peak, while resale prices have declined by 12%, indicating some resilience in the market.
Future Outlook
Looking ahead, the GTA condo market holds opportunities for recovery. To regain momentum, a combination of rising resale prices, increasing rents, and significantly lower interest rates will be crucial. Although the price gap between new and resale condos remains wide, the anticipated decrease in interest rates could gradually enhance market conditions.
Additionally, increasing the supply of purpose-built rentals is essential for maintaining affordability and stability. This shift would not only support the rental market but also provide a more balanced housing supply that can attract diverse investors. While the market faces changes, these conditions also present a unique opportunity for innovation and strategic growth, positioning the GTA condo market to emerge more resilient and competitive in the future. The focus on long-term solutions and adaptive strategies could turn current hurdles into stepping stones for sustained success.
Stay tuned for updates as we monitor these developments closely.
*Source – CIBC Economics*
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