Even a sharp recession is unlikely to restore affordability to Toronto’s housing market, according to a new study from Desjardins that should give pause to those looking for a chance to buy in.

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The report by chief economist and strategist Jimmy Jean and principal economist Marc Desormeaux found that in a “worst-case scenario” recession akin to the 1990s, Toronto’s average home values would decline by $185,000 (16 per cent) by the end of 2024. This reduction could potentially deepen to $340,000 (30 per cent) below the July 2023 benchmark of $1,161,200 by the close of 2025.

However, even if that nightmarish scenario unfolds over the next few years, Toronto’s home price-to-per capita disposable income ratio would merely return to the elevated levels seen in late 2015.

“That (2015) was considered to be a record level of unaffordability at that time,” the Sept. 5 report said. “And the ensuing froth in 2016 and early 2017 prompted the provincial government to enact a suite of measures to cool the housing market down.”

Though a drop in housing prices might seem like a silver lining for potential buyers, the report points out the substantial economic and social costs associated.

“A 1990s‑style recession would result in a more than $35-billion reduction in employment income and almost half a million total job losses by Q4 2025,” the report said.

The economists pointed out that any recession is not likely to hit as hard as the one in the early 1990s.

They also assessed other potential scenarios, including one in which sustained population growth and limited new listings drove house prices above their February 2022 peak by six per cent come early 2025. While this trajectory would be advantageous for existing property owners, it would exacerbate problems for those looking to buy.

Desormeaux said in an interview housing has increasingly become a dominant force in Canada’s economy. The growing share of housing in GDP is a primary reason for the anticipated recession in Canada.

“Our view is that the significant increases in interest rates that we’ve seen over the last year will increasingly weigh down the Canadian economy,” Desormeaux said. “The most debt sensitive  — consumers, households, businesses — will result in contracting GDP in the coming quarters. All of that speaks to the outsized role that housing does play in the Canadian economy.”

But it’s not just interest rates that concern him.

Desormeaux said the long-term implications of the persistent lack of affordability in housing brings risks as well.

“Our reputation as a welcoming and affordable jurisdiction and prosperous place to live is at risk if we can’t get housing affordability into more normal levels,” he said.