Why Canada's micro-condos are losing their appeal

Core Viewpoint - The appeal of micro-condos in Canada is declining as the condo market faces significant downturns, leading to a sharp drop in their value and increased inventory of unsold units [3][7][18]. Market Overview - Canada's condo market is experiencing a downturn not seen since the 1980s, with thousands of unsold units and 18 condo projects cancelled in Toronto over the past year [3][18]. - Micro-condos, which have become prevalent in Toronto and Vancouver, are particularly affected, with their values dropping significantly [3][5]. Supply and Demand Dynamics - An oversupply of condos has resulted from a surge in construction to meet population growth driven by immigration, but recent policy changes have led to a decline in new arrivals [10][11]. - The market saw over 60,000 new units completed recently, but demand has diminished, leading to a significant imbalance [12]. Pricing Trends - Prices for micro-condos have plummeted, with some units that sold for C$500,000 now reselling for C$300,000 or less [7][14]. - The Bank of Canada’s interest rate hikes have contributed to uncertainty in the market, affecting investor confidence and leading to forced sales at losses [13][14]. Investor Behavior - Investors predominantly own condos under 600 square feet, which have increased from 7.7% to 38% of the market since 2016 [5]. - The downturn is shifting the focus of developers from short-term investors to long-term buyers who intend to occupy the units [16]. Rental Market Impact - Renters are benefiting from the increased supply and lower prices, with more options available and improved rental deals [15][17]. - The shift in the market dynamics is allowing some buyers to enter the market at lower prices, creating opportunities for those seeking bargains [17]. Future Outlook - The construction of new units is slowing, which may exacerbate the housing crisis in Canada as the demand for affordable housing remains [18]. - Experts warn that the current low prices may not last, raising concerns about future housing supply implications [19].