Toronto Condo Market Hits 30-Year Low as Sales Crash 81% in Q3-2024: Urbanation
Toronto Condo Market Hits 30-Year Low as Sales Crash 81% in Q3-2024: Urbanation
Urbanation Inc.’s Q3-2024 report reveals that the new condominium market in the GTHA is navigating its most challenging period in decades.
Key Takeaways:
- Record Low Condo Sales: New condo sales in the Toronto-Hamilton market plummeted by 81% year-over-year, hitting the lowest level in nearly three decades.
- High Unsold Inventory: Despite a record pace of condo construction, the region saw unsold units drop by 4.4% quarter-over-quarter due to fewer project launches.
- Shift to Rentals: A number of new condo projects are being converted to rental units, attracting interest from institutional investors.
- Long-Term Supply Impact: The slowdown in new sales, coupled with project conversions and cancellations, could impact apartment supply and rental markets for years to come.
- Optimistic Outlook Amid Challenges: Experts anticipate gradual recovery with declining interest rates and a drop in construction inventory, although challenges remain.
The Toronto region, comprising the Greater Toronto-Hamilton Area (GTHA), is witnessing a historic dip in new condo sales despite the market being on track for record condo construction. Data from condo research firm Urbanation highlights a dramatic decline in demand, marking the slowest quarterly sales since 1995. This slowdown could have significant implications for the region’s apartment supply and broader housing market for years to come.
A Historic Drop in Sales
New condo sales in the GTHA totaled just 567 units in the third quarter of 2024. This figure represents an 81% decline compared to the same period last year and is 87% below the 10-year quarterly average. Urbanation’s data indicates that the market is on track for its weakest year since 1996, with only 3,641 units sold in the first three quarters of the year—a 63% drop from last year.
Table 1: New Condo Sales GTHA (Q3-2024):
Shaun Hildebrand, the president of Urbanation, pointed out that the new condo market is currently facing its toughest challenge in decades. "Investors are inactive, and end-user buyers have plenty of lower-priced options in the resale market," he noted. Hildebrand remains optimistic, however, suggesting that conditions could improve gradually as developers hold back supply, unsold inventory declines, and interest rates drop.
Pressure on Inventory Levels
The substantial slowdown in new sales has prompted developers to rethink their strategies, leading to a 4.4% drop in unsold units in the third quarter compared to a record high in the previous quarter. Urbanation’s report shows that 23,918 condo units remain unsold, with the decline largely attributed to the lack of new project launches. The third quarter saw only one new project come to market, offering 177 units.
Table 2: Unsold Inventory Breakdown:
Conversions and Cancellations on the Rise
As the market shifts, some developers are pivoting towards purpose-built rental units, which involve institutional investors owning entire buildings rather than individual condo units. Urbanation reported that three projects with a total of 1,111 units were converted to rentals during the third quarter. Moreover, eight projects comprising 2,231 units were either put on hold, canceled, or placed into receivership.
Over the past two years, 33 projects, amounting to 6,796 units, were either scrapped or shifted to rentals. This shift indicates an evolving market as developers respond to dwindling demand for presales and an increasing appetite for rental accommodations.
A Record Year for Completions Amid Uncertainty
Despite sluggish sales, the Toronto region remains on pace to surpass last year’s record high in condo completions. Urbanation projects that completions will reach 24,386 units in 2024, exceeding the 2023 record of 24,114 units. Furthermore, completions are expected to hit another record high in 2025 with 29,409 units before declining in subsequent years.
However, the current challenges could impact the supply of rental units, as Statistics Canada recently reported that nearly 39% of condos under construction are slated to become investment properties likely to enter the rental market. With Canada’s rental market already described as undersupplied by the Canada Mortgage and Housing Corporation (CMHC), this evolving dynamic could have long-lasting consequences for both renters and developers.
Price Adjustments and Buyer Incentives
Average unsold condo prices in Q3-2024 dropped by 2.4% year-over-year to $1,349 per square foot, down 5.6% from the peak of $1,429 per square foot in Q3-2022. Developers have introduced various incentives, such as cash-back offers and other price adjustments, to lure buyers amid stagnant sales.
Table 2: Avg. Price per Square Foot Comparison
The Bottom Line
The Toronto-Hamilton condo market is navigating a challenging phase marked by record low sales and a notable shift towards rentals. While new condo sales have dropped to their lowest levels in nearly 30 years, developers are responding by holding back on new launches and converting some projects into rental units. Despite a high level of unsold inventory, this adaptation signals resilience in the market amid economic uncertainties. As developers and buyers await better conditions, particularly with interest rates expected to decline, the long-term impact on the housing supply and rental market remains to be seen. Ultimately, the evolving market dynamics could shape future housing affordability and availability in the region.
Source: Urbanation
