TD Bank is pushing for an additional 10% decrease in GTA condo prices this year.

Recent findings from the GTA Condo Market Outlook by TD Bank suggest a potential drop in condo prices of 15-20% from their peak in the summer of 2023 by the end of 2025, with a significant portion of this decline expected to take place within this year alone. This projection comes as a response to the substantial fall in demand for condos, leading to a 4% decrease in benchmark prices on an annual basis and a sharp decrease in sales to levels not witnessed since the financial crisis in 2008 and 2009. Factors contributing to this decline include condos becoming less appealing as investments due to higher interest rates compared to the pre-pandemic era, and an oversupply of housing, shifting the market in favor of buyers in 2024.

The forecast for continued market weakness in 2025, alongside unforeseen events, prompted TD to revise their previous projection, which envisioned a decrease in condo prices stabilizing in early 2025. The revised projection now anticipates prices to continue falling throughout the year, erasing much of the gains made by condos during the pandemic, although prices still hover 10-15% higher than pre-pandemic levels.

The primary reason for this downward revision is a decrease in demand resulting from uncertainty related to trade conflicts, sluggish population growth, and persistent high levels of new condo completions. The ongoing US-led trade war has deterred many potential buyers from making significant purchases, with a study indicating that a quarter of respondents were less likely to make major purchases due to these trade tensions. Additionally, with an expected 7% unemployment rate by Q3-2025 and sluggish wage growth, the outlook for the housing market appears bleak.

In terms of supply, the 2024 record-high number of completed condos is expected to decrease in 2025, although they will still remain elevated compared to previous years, exerting further pressure on prices as the market becomes saturated. Looking ahead to 2026, TD predicts a slightly more stable market but expresses skepticism about a dramatic turnaround.

Some factors that may inject some vitality into the condo market next year include anticipated reductions in interest rates, with the Bank of Canada projected to decrease its policy rate by an additional 50 basis points this year, reaching 2.25%, and reduced uncertainty surrounding tariffs. Moreover, a decline in condo completions and new housing policies from the newly-elected Liberal government, such as the removal of GST for first-time homebuyers on properties under $1 million, could boost demand for condos.

Nevertheless, challenges persist in the GTA condo market, including expected slowing population growth, hesitation among investors, and prices likely remaining unaffordable for many potential buyers. Overcoming the uncertainty resulting from trade conflicts is expected to be a slow process, reflecting a long-lasting impact on consumer and business confidence.