Toronto has become the tale of two housing markets — high-rise condos where sales, and now prices, have been slumping and houses where prices continue to defy gravity.

After almost a decade of almost unbridled demand and price growth, the GTA housing market is in slowdown mode and unlikely to show any marked recovery until the second half of 2013, according to a market outlook report from the Canada Housing and Mortgage Corp.

But exactly where things are headed depends on whether you are gazing up at sky-high glass-and-steel condo towers or down tree-lined residential streets.

Sales via MLS were down 15.6 per cent across the GTA last month compared to October of 2011 (or 7.1 per cent if you factor in the impact of two extra business days this October over last along with the vagaries of reporting estate deals).

But the continued overall strength of the house market — even in the face of easing sales — has helped mask a marked downturn in condo demand that’s been picking up steam since last spring.

“I believe the slowdown we’re seeing has largely been caused by the tightening of financing rules and is a short-term shock which is basically going to take some people out of the market for a year,” until they can save up a bigger downpayment, says veteran realtor and condo developer Brad Lamb.

“The single family home market is another thing. There’s not a lot of new supply coming there (unlike the GTA condo market where about 50,000 new units are under construction), so prices will continue to rise.”

Modest employment growth, “headwinds” from the tighter mortgage rules and a drop in both new home and condo construction are likely to be the hallmarks of the housing market until the second half of 2013 as demand cools, says CMHC.

That’s a good thing, say housing experts and economists, and what’s needed to bring building and prices back to more realistic levels.

Condo sales have nose-dived just since May, and now prices are starting to slip, at least in the city: The price of a Toronto condo traded via MLS averaged $358,741 in October, down 2 per cent over a year earlier, while sales were off 14 per cent, according to figures from TREB.

That compared to a 20 per cent decline in resale condo activity in the 905 regions but a four per cent increase in average price to $286,138. New condo sales have seen a much more dramatic downturn — about 30 per cent — as developers hold back on project launches and offer incentives to buy.

Even low-rise homes sales are softening. Bidding wars and bully bids are rare now, as homes that were selling in a frantic few days just last spring sit on the market for weeks.

“Sellers have been conditioned to think they are going to make a killing, but the playing field is being levelled,” says Coldwell Banker realtor Claude Boiron.

Sales of detached homes were down three per cent and semi-detached off seven per cent in October, year over year. But prices were up seven and six per cent respectively as listings for homes rose, but still not enough to match historic norms, says TREB.

Lamb now has three condo projects in the works but he’s opted to lease out three other potential development sites, rather than go ahead with more condo projects now. Other developers are also taking a wait-and-see attitude.

“I’m still buying real estate, I’m just not buying development sites. I have absolutely no plans to build anything in the city for quite a while,” Lamb said.

A number of concerns now colour the condo market: A 30 to 40 per cent drop in interest by investors who’ve largely fuelled the Toronto condo boom since 2007; consumer frustration that new units are too small and too expensive at $600 or more per square foot; the rising inventory of unsold condos and fears over how many so-called “assignment” units could hit the softening market.

Those are units bought in the preconstruction phase by people who intend to flip — or “assign” — them to new buyers at a significant markup before having to pay final payments, including land transfer taxes.

Lamb has called that underground condo market (developer rules usually forbid listing assignments on the public MLS system) a “monster.” One downtown condo realtor estimates some 6,000 to 7,000 assignments could come on the market in next year or two.

The big unknown is if the owners are largely wealthy investors or average folks in over their head who will just walk away or dump discounted units into a slumping market.

With the downtown rental vacancy rate at just 1.3 per cent and bidding wars for newer rental condos that have helped drive up rents about 20 per cent in the last two years, Lamb believes many of those owners will opt to rent until the market picks up. Realtors believe that will be next spring.

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As for the single-famiy home market, “They’re not making more land,” as realtors love to say.

The drive to be close to work and transit continues to fuel the demand for houses close to downtown, even if a detached in the 416 region now costs an average $779,484.

That’s not likely to change much, say housing experts, unless interest rates or the economy does.