'Our country shrunk in the second half of '25': Royal LePage CEO on decreased condominium demand

Key Concepts

• Supply-Constrained Markets: Regions where housing demand significantly outpaces available inventory, leading to upward price pressure.
• Inventory Overhang: An excess of available housing units, specifically noted in the Toronto condominium sector.
• Non-Permanent Residents (NPRs): A demographic including foreign students and temporary workers whose presence significantly impacts rental demand and investor activity.
• "Sell-Before-Buy" Strategy: A shift in consumer behavior where homeowners prioritize selling their current property before committing to a new purchase, moving away from the previous norm of buying first.
• Structural Supply Constraints: The long-term issue of building levels failing to keep pace with population growth and housing demand.

Market Dynamics and Regional Variations

Phil Soper, CEO and President of Royal LePage, highlights a bifurcated Canadian housing market. While national data shows a 16th consecutive month of price declines and a slow start to the spring market, the experience varies significantly by geography:

• Moderately Priced Markets: Secondary markets, particularly in Northern Ontario and parts of Quebec, are experiencing tight inventory and rising wages due to resource-based industries. These areas are seeing upward price pressure.
• Major Urban Centers: Toronto and Vancouver are experiencing different conditions, with Toronto specifically dealing with an oversupply of condominiums.
• Quebec City: Identified as the most supply-constrained city in Canada, experiencing a 12.5% year-over-year price increase driven by basic supply-and-demand imbalances.

The Condominium Sector and First-Time Buyers

The Toronto condo market is currently characterized by an excess of supply. However, Soper notes that the detached and semi-detached segments are showing renewed activity.

• First-Time Buyer Hesitancy: This demographic remains on the sidelines due to geopolitical and geo-economic tensions.
• Rental Market Influence: Softer rental prices have reduced the urgency for first-time buyers to transition into homeownership, a shift from the historical trend where high rents typically forced people into the buying market.
• Investor Impact: The reduction in non-permanent residents (foreign students and temporary workers) has diminished the pool of tenants for property investors, who are essential for maintaining Canada’s rental stock. Soper suggests that policy changes regarding these groups could lead to an "almost immediate" change in the trajectory of condo demand.

Economic Drivers and Policy Impact

• Building Levels: Current construction levels are low. Soper warns that once the market moves toward a full national recovery, Canada will likely face severe supply shortages again due to the gap between forward-looking demand and current building rates.
• Government Stimulus: Recent government interventions, such as the expansion of GST/HST rebates, have been met with a "very strong positive reaction" from banks, brokerages, and builders. While these measures target the friction points in the real estate cycle, Soper notes it is currently too soon to see their impact in the data, with expected results likely appearing in second-quarter reports.

Key Arguments and Perspectives

• The "New" Norm: Soper emphasizes a shift in consumer behavior where buyers are now selling their homes before purchasing new ones. This is a departure from the last 20 years, where buyers would secure a new property first due to the fear of missing out in a supply-constrained environment.
• Forecast: Excluding Toronto and Vancouver, major Canadian cities are expected to see low-to-mid single-digit price increases.
• Policy Sensitivity: Soper argues that the housing market is highly sensitive to policy shifts regarding immigration and non-permanent residents, noting that the country effectively "shrunk" in the second half of 2025, which is a concern for policymakers.

Synthesis and Conclusion

The Canadian housing market is currently in a state of transition. While national averages suggest a cooling period, the reality is a complex mix of supply-constrained secondary markets and urban centers struggling with inventory imbalances—particularly in the condo sector. The recovery of the market is contingent upon a stabilization of building levels, a potential shift in policies regarding non-permanent residents, and the effectiveness of recent government tax incentives. Soper concludes that while the market is currently navigating these challenges, the underlying structural issue of insufficient housing supply remains the primary long-term concern for the Canadian real estate landscape.