Sluggish condo market shambles the plan of young homebuyers seeking to climb the property ladder

With lots of properties for sale, little competition and falling mortgage rates, now is a golden opportunity for young Canadians who feel secure in their jobs to purchase a house. But the sluggish condo market is throwing a wrench into the plans of even those lucky few would-be homebuyers.

 

The trade war triggered by U.S. President Donald Trump has spooked scores of potential homebuyers out of the market just after many homeowners had pitched “for sale” signs on their front lawns. Economic uncertainty and concerns about layoffs are holding back Canadians pondering a home purchase even though interest rate cuts by the Bank of Canada and falling bond yields mean borrowers can expect lower rates on both variable and fixed mortgage rates. The number of homes sold in February was down by double-digits compared to the same month last year in major cities including Toronto, Vancouver and Calgary.

 

The current conditions are a rare chance for daring buyers to make the most of ample choices and more bargaining power. That includes some millennials and older Gen-Z eager to trade their condos – meant to be their first rung on the property ladder – for larger abodes.

 

But long-standing woes in the condo market are making it hard for young people who bought units as starter homes in recent years to find buyers or fetch the high prices that would allow them to buy a bigger home.

“People feel like they just can’t upsize,” said John Pasalis, president and broker of record at Realosophy Realty in Toronto.

 

In some cases, the problem is that sellers are pricing too high, he said. The value of a typical condo in the Toronto region in January was 18 per cent below the peak reached in April of 2022, according to data from the Canadian Real Estate Association.

 

But even condo owners who’ve priced their units competitively sometimes struggle to find buyers, he added.

 

For those who can’t wait to upsize, one solution is to rent, rather than buy, a larger home while renting out their condo, Mr. Pasalis said.

 

“We had a client who couldn’t sell their condo. They had a kid, they needed to do something, so they just decided to rent a house,” he said.

 

At Oakwyn Realty in Vancouver, realtor Steve Saretsky said he’s seeing a more muted version of what’s happening in Toronto in some of the Lower Mainland suburbs, where much of the recent condo construction has been concentrated.

The challenge for a lot of condo owners in the area is that they may not be able to sell for much more than what they bought their units for a few years ago. And virtually flat prices won’t cover the steep transaction costs – from real estate agent commissions to legal fees – involved in buying and selling a home, he said.

 

But while Mr. Saretsky says there are disappointed condo sellers, he isn’t seeing many who feel stuck and unable to upsize.

 

Still, for those seeking to climb to the next step of the property ladder, Mr. Saretsky’s advice is to sell the condo before buying a new home.

 

That way, buyers will avoid the stress of having their condo sit on the market when they’ve already committed to a purchase or the risk of having to settle for a lower price because they must free up cash to finance their new home, he said.

 

 

 

This article was first reported by The Globe and Mail