Canada's real estate market is on the brink of a significant downturn, with Vancouver and Toronto leading the charge. While Toronto has been the poster child for condo collapse, Vancouver's story is equally alarming. After nearly four years of flat or falling prices, Vancouver's condo market is still searching for a bottom, with sales hitting their lowest level outside the pandemic since 2018. This is despite the challenges faced by the Greater Vancouver Area's economy, including a tariff war with the United States, which has hit manufacturing, wholesale, and retail trade, transportation, and warehousing, resulting in a pullback in hiring. Finance, insurance, and real estate have also suffered due to the depressed housing market, pushing the unemployment rate up to 6.7%.
Climbing mortgage rates since the start of the Iran war have likely dampened demand, and according to TD modelling, British Columbia is historically the province most sensitive to interest rate increases in the country. TD forecasts Vancouver condo prices will fall another 8% this year before flattening out in 2027, adding up to a 15% drop from their peak in 2023, the steepest decline since at least 2005. As bad as that sounds, Vancouver is still better off than Toronto, mainly because the two cities have very different markets.
Toronto's condo market, largely driven by investors, has been struggling with a historic supply glut as owners put their properties up for sale due to falling rents and higher carrying costs. In contrast, Vancouver's market is more driven by end users, who buy condos to live in them, making apartments an attainable entry point for ownership. Listings have not climbed to the heights seen in Toronto, and the market is less volatile.
Despite the challenges, TD expects conditions to improve 'modestly' in 2027 as hiring picks up and lower prices entice more buyers. However, soft population growth and a still 'muted' labour market will temper gains. When the dust settles, Vancouver condo prices will still remain above pre-pandemic levels, which beats Toronto, where prices are expected to fall 'meaningfully' below pre-pandemic benchmarks.
In conclusion, Canada's real estate market is on the brink of a significant downturn, with Vancouver and Toronto leading the charge. While Toronto has been the poster child for condo collapse, Vancouver's story is equally alarming. The challenges faced by the Greater Vancouver Area's economy, including a tariff war with the United States, have hit manufacturing, wholesale, and retail trade, transportation, and warehousing, resulting in a pullback in hiring. Climbing mortgage rates have likely dampened demand, and TD forecasts a steep decline in condo prices. However, there is a glimmer of hope as conditions are expected to improve 'modestly' in 2027.
