One of Toronto’s largest real estate developers says home prices in the city could drop by as much as 20%. In the longer term, however, sustained immigration demand will prevent larger falls that could destabilize the market more broadly.
“Will there be a drop in prices? Yes,” Danielle Corp. CEO Mitchell Cohen said in an interview. “Is it 50 percent? No. Is it 10 to 20 percent? Probably. I don’t see a catastrophic burst of this balloon that we’ve been living in because Toronto, the largest area of Toronto, for Canada is an economic hub. “People will continue to come to Toronto, they will want to live in Toronto. And the units we are building will be filled.”
Cohen’s projections are in line with some economists who say Canadian home values will return some of the 50 percent gain they saw during the pandemic. It is possible that this correction is already underway, as the country’s reference house price recorded its first annual drop in two years last month. Markets like Toronto, which had previously seen the biggest gains, have led the way down.
Cohen said people who are more likely to get into trouble will be investors who have bought units to invest in or whose mortgage payments are higher than they can expect to rent, as interest rates rise. Although investors accounted for about a fifth of the market in Canada last year, any unit they are forced to sell will eventually find buyers or tenants, amid record levels of immigration, he said.