The Globe and Mail recently reported that housing sales across Canada dropped 12.5% in February from a year earlier. Vancouver was off 29.4% and Toronto was off 15.4%.
The Toronto market has the advantage of a large and growing population, with that increasing population all requiring some form of housing. This should mean that even if there is a decrease in volume of sales in the short term, the longer-term outlook should see demand taking care of supply.

My biggest concern would be in the condo market, first in Toronto, where over-construction has already created an over-supply. That market is starting to feel the affects: developers are discounting unsold units and offering huge incentives to try to bring enough buyers forward to get their buildings sold.

Montreal has a similar situation but is likely to be worse off. So many new units are about to be completed with many only (in truth 50%) sold that supply and demand is going to create a very difficult situation. Simply, there are not currently enough potential buyers to fill these units, and our population is not increasing to support new housing generally.

My experience over the last 33 years tells me that when the press starts talking about a real estate problem in Toronto, we in Montreal will be affected about 2-4 months later. Usually not to the same extreme, but this time, my sense is that the new or soon to be completed condo buildings are going to be in serious trouble. This further “stresses” the owners who have committed to buy, as they look at paying a much larger share of the common condo expenses. It is interesting that the single family homes market will be, to a large part, unaffected. The “empty nesters” who would have been buying condos will be afraid to jump into a descending market. As such, their houses will not go on the market which will help maintain a balance on the supply side. So, I predict no real change in prices, with overall activity in Montreal’s West Island being only a small percentage lower than last year.

As a follow up to one of my earlier blogs, I believe that the measures of Finance Minister Flaherty were wise and if anything a little late. I believe it’s our Governments responsibility to protect the population from themselves. Previous amortization periods up to 35 years and virtual “no money down” purchases were asking for huge trouble. Frankly, to go a bit further, they never should have been allowed in the first place.

Respectfully my opinion,

John Deakin
President, Deakin Realty