Is it time to rethink condo investments?
Nearly one-third of Canadians no longer believe condominiums are a sound investment, according to a new report by RATESDOTCA.
The online survey of over 1,500 Canadians found that 30% view condos as a diminishing investment opportunity. Only 11% said they would consider buying a condo as an investment, while more than half (57%) indicated they would not purchase one at all.
Oversupply of condos
Experts are divided on their view, describing the current condo market as a mixed bag. Kevin Wong, a mortgage agent at Swivel Mortgage Group, noted that while pricing has remained relatively stable, high inventory and subdued sales activity are dampening investor enthusiasm.
“There’s an abundant inventory coming up,” Wong said. “Although the pricing has remained steady, we’re actually seeing a decline in sales in the condo market.”
Oversupply has become a critical issue, particularly in urban centres like Toronto and Vancouver. Years of robust preconstruction activity have resulted in a glut of completed units outpacing demand. Frank Clayton, co-founder of Toronto Metropolitan University’s Centre for Urban Research and Land Development, remarked, “We’ve overproduced condos,” noting since the late 1990s, thousands of condominiums have been built across Canada.
Diminished returns
Falling resale values and rising borrowing costs have also made it difficult for investors to achieve positive returns. Many now face monthly losses of $500 to $700 – a sharp increase from the $100 to $200 shortfalls that were previously considered manageable. “The math for investors doesn’t make sense the way it used to,” said Toronto-based real estate broker Davelle Morrison.
Rental returns have also cooled. According to RATESDOTCA, average asking rents in Canada decreased 2.8% year-over-year in March, marking the sixth consecutive month of annual declines. Coupled with rising carrying costs, this trend has prompted many investors to divest or seek more profitable markets.
Younger Canadians remain optimistic
Despite the challenges, younger Canadians remain somewhat optimistic. The survey found that 28% of those aged 18 to 34 believe condos are still a good investment, primarily as an affordable entry point into the housing market.
Affordability varies widely across the country. While cities like Calgary and Edmonton offer significant income surpluses for prospective buyers, Vancouver and Toronto continue to be less accessible. In Vancouver, the average condo price of $768,200 requires an income of $182,000 — nearly $50,000 more than the median family income.
Looking ahead, experts anticipate further price declines before a potential recovery. “If all remains the same – meaning elevated inventory levels, flat interest rates, and ongoing uncertainty persist – I anticipate condo prices to either remain flat or trend slightly downward,” Wong said.
What are your thoughts on the current developments in the condo market? Share your insights in the comments below.
