Canada’s housing agency, the Canada Mortgage and Housing Corp (CMHC), has highlighted similarities between the current weakening condo market in the Greater Toronto Area and the crash of the early 1990s. However, the agency points out that various factors are likely to mitigate the severity of the current downturn.
According to CMHC’s recent report, the Greater Toronto Area’s condo prices are experiencing declines reminiscent of the early ’90s. Despite this, the agency is optimistic that prices will rebound sooner this time around, attributed to a more diverse and stable economy, stricter lending regulations, and an existing shortage of homes in the region.
One significant difference noted is the current housing shortage, which contrasts with the speculative overbuilding seen during the 1990s downturn. The implementation of the mortgage stress test has also played a role in reducing the impact of the market pullback and maintaining lower levels of mortgage delinquency.
Additionally, banks now require a higher number of pre-sold condo units before commencing construction, contributing to a more cautious approach to development. CMHC foresees a more balanced market in the future as the sharp decline in condo construction starts indicates fewer units entering the market beyond 2026.