With Canadian homeowners facing significant increases in mortgage payments, a surge in property listings has hit the market, particularly in Toronto, where housing inventory has reached its highest level in over a decade. This influx signals a potential drop in prices in the coming months.
Toronto, which accounts for two-thirds of Canada’s condominium sales, has seen a dramatic rise in available properties, surpassing records from ten years ago, while sales remain sluggish. This trend suggests potential defaults or an imminent price correction, according to real estate consultants.
The surge is driven by homeowners and investors who purchased properties at low mortgage rates five years ago, now facing much higher rates as their mortgages come up for renewal. Canadian mortgages typically span 25 years with renewals every three to five years, contrasting with the fixed rates available in the U.S.
Current rates could see mortgage payments double for many, with an estimated C$300 billion in mortgages up for renewal next year. Some investors are opting to walk away from their properties due to unaffordable payments, yet many are hesitant to lower asking prices and incur losses.
The trend is particularly evident in the condominium market, where inventory has reached historic highs. Listings in the Toronto area rose by nearly 25% in the first quarter of 2024 compared to the same period last year, while sales increased by only 5.3%.
Despite the Bank of Canada recently lowering its benchmark rate to 4.75%, economists suggest this will have limited impact on mortgage rates, which are tied to long-term bond yields. A further rate cut is expected, but it may not sufficiently ease the burden on homeowners facing renewal.
Experts predict a potential 10% drop in Toronto condo prices by the end of the year, as the market adjusts to these economic pressures.