GTA Faces Historic Condo Oversupply as New Sales Hit Three-Decade Low

The Greater Toronto Area’s condo market is grappling with nearly 40,000 unsold units, the highest level of inventory the market has ever seen. With absorption expected to take over 50 months, what does this mean for developers, investors, and buyers? Discover the key insights and projections for 2025 in our latest analysis.

Key Takeaways:

The Greater Toronto Area (GTA) currently faces an unprecedented condo supply of nearly 40,000 units across different categories, including unsold development units, assignment listings, and resale listings.
Experts predict it could take over 50 months to absorb this level of inventory, compared to a balanced market which typically takes around 14-16 months.
New condo sales hit a 30-year low in Q3 2024, with developers holding back many projects amid rising inventory and slowing market conditions.
Resale listings have surged by 92% over the past two years, driven by investor sell-offs and rising assignment listings.
Expectations are for supply to decline next year as market conditions improve and developers reconsider launching new projects.

GTA Condo Supply Is Approaching a Number “The Market Has Never Seen”

The Greater Toronto Area (GTA) real estate market is no stranger to fluctuation. However, the current condo market situation is unprecedented in both scale and impact. According to recent insights from Urbanation President, Shaun Hildebrand, nearly 40,000 condo units are now sitting in a sort of limbo. These units include unsold properties in new developments, active resale listings on MLS, and an increasing number of assignment listings. As market experts analyze this surplus, questions arise about how long it will take for this supply to be absorbed, especially amid ongoing housing challenges.

Breaking Down the Numbers

Hildebrand’s assessment reveals a breakdown of the current condo market situation that’s concerning for both developers and investors. Out of the nearly 40,000 units, approximately 24,000 are unsold in development projects scattered across the GTA. Additionally, there are around 9,000 active resale listings, while an estimated 5,000 units nearing completion are listed as assignments.

Graph 1: Breakdown of Stagnant Condo Supply in the GTA

This substantial inventory, Hildebrand suggests, is something the GTA real estate market has never experienced before. The ongoing absorption challenge is compounded by expectations that condo completions will continue at record levels over the next few years. Developers, investors, and prospective buyers are all keenly watching how the market adjusts to this oversupply.

What Does This Mean for Absorption Rates?

To better understand the absorption issue, Hildebrand estimates that at current sales rates, it would take over 50 months for the new and resale condo inventory to be fully absorbed. That’s more than four years—an absorption period far from the ideal market balance. In a healthier market, it should take around 14 to 16 months to absorb new and resale condo supply. “Sales are so slow right now that they really can’t go any lower,” he notes, highlighting that new condo sales hit a 30-year low in the third quarter of 2024.

The slowdown in new condo sales began in the latter half of 2022, and the situation only worsened throughout 2023 and 2024. Although developers chose to delay several projects amid declining sales, a significant number proceeded, driven perhaps by optimistic forecasts or contractual commitments. Since the second half of 2022, around 35,000 new units were launched for presales, yet just 22,000 were successfully sold. This gap led to a rapid rise in unsold new condo inventory, which spiked by 58% over the past two years.

Record Highs in New Condo Completions

Another pressing issue adding to the supply glut is the pace of condo completions. In 2023, new condo completions hit an all-time high, with 24,114 units entering the market. And if forecasts hold true, 2024 will see an even higher number of completions—around 24,386 units. The upward trend is expected to continue into 2025, with an estimated 29,409 new condo units hitting the market.

Graph 2: GTA Condo Completions from 2023 to 2025

However, this influx of new units coincides with a sharp increase in resale and assignment listings. Investors looking to offload units are driving resale listings upward, pushing active resale inventory up by a staggering 92% over the past two years. This surge is closely tied to investors’ concerns over market stability, rising interest rates, and the mounting costs of holding onto these properties.

Developers Hit the Brakes

Hildebrand underscores that despite the increase in inventory, many developers are now holding back on new projects. In the third quarter of 2024 alone, only one new project was launched—a stark contrast to the many developments announced in previous years. Cautious developers are waiting for market conditions to improve before reinitiating presales for their new projects.

A Glimpse at the Future

While the current numbers paint a grim picture, Hildebrand hints at possible optimism for the coming years. With expectations that interest rates might lower and market optimism could increase, sales could begin to show improvement. However, developers are likely to remain cautious, focusing on stabilizing existing projects rather than flooding the market with new supply.

Another factor to consider is the potential cancellation or conversion of projects. Hildebrand suggests that some developments may be canceled entirely or restructured as rental properties, reducing the pressure on the condo market. These strategic decisions could help bring the market closer to a balanced state over time.

The journey to stabilization, however, will likely be slow. “Although it may take a while to get back to a balanced state,” Hildebrand warns, “supply should decline next year as sales begin to show some improvement and developers remain cautious in launching new projects.”

The Bottom Line

The GTA condo market is currently in uncharted territory, facing an overwhelming number of unsold units and a sluggish sales environment. With completions continuing to hit record highs and resale inventory on the rise, absorption challenges are expected to persist for some time. Developers are now more cautious, focusing on existing projects and awaiting a clearer market signal before launching new ones.

While there are signs that the market could recover, much will depend on the broader economic environment, including interest rates, investor confidence, and the adaptability of developers to market conditions. For now, stakeholders in the GTA’s condo market are navigating through an unprecedented phase, with hopes that strategic measures can help restore equilibrium.

This situation poses significant questions for developers, investors, and homebuyers alike. What happens next will hinge on how quickly the market can adjust to this surplus, and whether developers will continue to delay projects or opt for alternative strategies to navigate this challenging period.

Source: Storeys

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GTA Faces Historic Condo Oversupply as New Sales Hit Three-Decade Low