Toronto’s housing market is facing renewed pressure as mortgage costs and economic uncertainty keep buyers cautious. But the slowdown is uneven: smaller condos face particular challenges, while other Canadian markets have remained more resilient.
In a recent interview, housing analyst John Pasalis discussed the forces behind this divide—and why a quick recovery may be difficult.
Smaller Condos Face a Tougher Market
Toronto’s condo market includes a wide range of properties, and average figures can hide important differences.
According to Pasalis, small units built largely for investors are among the most challenged. As investors look to sell, demand from buyers who want to live in these properties has been insufficient to absorb the available supply.
For buyers, this makes the individual unit especially important. Size, layout, location, maintenance fees, and everyday functionality deserve close attention. A lower asking price alone does not tell the full story.
Canada’s Housing Market Is Moving at Different Speeds
The weakness described in the interview is concentrated in Southern Ontario and British Columbia, rather than spread evenly across Canada.
Pasalis noted that many markets in the Prairies, Atlantic Canada, and Quebec have been more stable. Some have returned to or exceeded their pandemic-era price highs.
One explanation is the scale of the earlier boom. Toronto and Vancouver attracted substantial investment and experienced sharp price increases during the pandemic. Markets with more modest increases generally had less ground to lose when borrowing costs rose.
This regional divide highlights the limits of national headlines. Conditions in one city may offer little guidance about another.
Mortgage Costs Continue to Limit Affordability
Low borrowing costs helped buyers stretch their budgets during the pandemic. Higher rates have since reduced purchasing power and increased costs for some homeowners renewing their mortgages.
The impact varies with the mortgage balance, previous rate, remaining amortization, and renewal terms. Even so, higher payments can make moving less attractive and leave households with less financial flexibility.
For prospective buyers, affordability depends on the full monthly cost of ownership, including mortgage payments, property taxes, maintenance, and insurance.
Buyer Expectations Are Also Slowing Activity
Financial calculations are only part of the picture. Expectations influence when people choose to buy.
When prices are falling, buyers may delay because they believe a better opportunity will appear later. Economic uncertainty can reinforce that hesitation, particularly when households are unsure about employment or future borrowing costs.
Pasalis identified this cautious mindset as another reason activity can weaken even after prices have declined.
Fewer New Listings Do Not Automatically Mean a Recovery
In the interview, Pasalis also described a decline in new listings. Some owners may be postponing a sale while waiting for stronger prices or lower rates.
However, reduced listing activity does not necessarily create upward pressure on prices if buyer demand is also weak. Owners who eventually need to sell could bring additional supply to the market, adding competition among listings.
The balance between motivated buyers and motivated sellers will matter more than either number on its own.
What Buyers and Sellers Can Take Away
Buyers should compare recent sales, assess the property’s suitability, and build their budget around realistic ownership costs. In the condo market, particular attention should go to layouts that support comfortable everyday living.
Sellers should focus on current competition and recent comparable transactions when setting their price. Careful preparation and realistic positioning become especially valuable when buyers have more choice.
Pasalis’s outlook suggests a gradual adjustment rather than an immediate rebound. For anyone planning a move, understanding the specific neighbourhood and property type will be more useful than relying on broad market expectations.
Source: Adapted from the supplied interview with John Pasalis. Market observations and forecasts reflect the discussion at the time of the interview.
