Young buyers caught between falling prices and limited demand
Many young homeowners in Canada's condo market, especially in Toronto, are finding themselves trapped, unable to move up the property ladder due to difficulties selling their existing units – even as mortgage rates ease and buying opportunities increase.
Economic uncertainty sparked by the ongoing tariff dispute with the US has created a complicated scenario: while mortgage rates are falling, offering a potentially attractive environment for buyers, young condo owners who intended their units as stepping stones to larger homes are encountering hurdles when trying to sell.
“People feel like they just can’t upsize,” said John Pasalis, president of Realosophy Realty in Toronto.
Condo owners who purchased units as starter properties are now stuck, either struggling to attract buyers or unable to achieve the price needed to move up.
The Canadian Real Estate Association reported that condo prices in Toronto fell 18% as of January compared to their April 2022 peak. Even when condos are priced competitively, finding buyers can still be difficult, said Pasalis.
Jeffrey Cheng, a realtor with RARE Real Estate, said the hardest properties to sell right now are smaller, one-bedroom units previously popular with small-scale investors.
“People are willing to pay a little more to live in a better space,” Cheng told The Globe and Mail.
The preconstruction segment, heavily impacted by rising building costs and declining rental rates, has also suffered. Investors who previously supported this market have grown cautious, creating a ripple effect that extends into the resale condo market.
Pasalis noted one practical solution for condo owners who find themselves unable to sell but still need more space: rent a larger home while leasing out the condo.
“We had a client who couldn’t sell their condo," he explained. "They had a kid, they needed to do something, so they rented a bigger home and leased their condo instead.”
Dave Wilkes, president of the Building Industry and Land Development Association, sees the current situation as especially concerning, describing it as "a very dire situation." Wilkes emphasized the need for collective action to address stalled condo projects and ensure housing remains available for the future.
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The situation isn't unique to Toronto. Condo owners in markets such as Vancouver also face stagnant prices, complicating their efforts to sell and upgrade homes. Realtor commissions, legal fees, and other transaction costs make it harder to justify selling without significant appreciation.
For now, Pasalis advises potential upsizers to consider selling their condos first before committing to a new home. This reduces the risk of financial strain or needing to accept a lower-than-expected offer to ensure a timely sale.
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