The number of condos sold in the Greater Toronto and Hamilton area in the first nine months of the year decreased 63-per-cent decrease from last year and was 84 per cent lower than in 2021.Abhijit Alka Anil/The Globe and Mail
New condo sales in the Toronto region have hit a near-30-year low as investors have turned away from the market and buyers can find more affordable resale options.
Only 567 new condos were sold in the third quarter this year, marking an 81-per-cent drop compared with the same period last year, according to a new report by Urbanation Inc., an industry research firm. That figure is 87 per cent below the average for the past decade and the lowest since the first quarter of 1995.
For the first nine months of the year, 3,641 condos were sold in the Greater Toronto and Hamilton area (GTHA), which is a 63-per-cent decrease from last year and 84 per cent lower than in 2021. The trend suggests 2024 will be the slowest year for condo sales since 1996, Urbanation said.
A key reason behind the decline is a lack of activity from investors, who typically drive sales in the Toronto condo market.
Davelle Morrison, a broker at Bosley Real Estate Ltd., said high interest rates are making it difficult for builders to secure financing for preconstruction condos, leading to fewer new units being put up for sale. There are currently 88,967 condos being built, the lowest level in more than three years, according to the report.
Competition from the resale market is also contributing to the decline in condo sales. Resale condos are priced between $900 to $1,100 a square foot, while preconstruction and new condos cost between $1,300 to $1,600 a square foot.
“It begs the question, why would you go and spend that much more money when you could just buy something in the resale condo market, see what you’re getting and own it,” Ms. Morrison said.
There was a shift in the market between the second and third quarters this year. The inventory of unsold new condos decreased by 4.4 per cent in the third quarter from the previous quarter, falling from a record high of 25,018 units to 23,918 units. It was the largest decrease in unsold units in two and a half years.
The main reason for that decline is the lack of new project launches, Urbanation said. With only one new project with 177 units launched in the third quarter, the limited availability of new units has led to few options on the market.
However, compared with last year, the number of unsold new condos has gone up by 16 per cent. The current inventory level for unsold condos is 56 per cent higher than the average for the past 10 years. This oversupply in the market can lead to a decrease in demand and encourage potential buyers to postpone their purchases. In addition, a large portion of the unsold new condos require at least a 20-per-cent deposit, which can also affect buyer interest.
The current economic climate is unfavourable for the condo market. High interest rates, combined with high labour and construction costs and lack of sales, is creating a challenging environment for builders and investors, Ms. Morrison said.
Additionally, many previously planned condo projects are being converted to rentals or are facing significant delays and cancellations. Three projects that make up a total of 1,111 units in the GTHA were changed to rental properties and a total of 2,231 units were either paused, cancelled, or went into receivership during the third quarter.
The report said that conditions will slowly improve as developers reduce supply and interest rates decline.
Editor’s note: A previous version of this article incorrectly stated that only one project with 771 units was launched in the third quarter. The project had 177 units. This version has been updated.