Blog.Remax.ca wraps up the Toronto condo market for 2023...
Has the weight of higher interest rates impacted the Toronto condo market?
Anyone who has taken a stroll in the city will observe cranes at nearly every major intersection, whether in midtown or near the lake. While construction activity looks healthy, demand has been less active, and price growth has not been stellar compared to the wider Toronto real estate market.
So, what is happening as of late in the major urban centre’s condominium industry? Moreover, what can the sector expect heading into 2024?
The Toronto Condo Market Today
A Toronto condo is attracting more demand than for detached properties and townhomes. However, prices are climbing at a faster pace for detached and townhome properties than condominiums.
According to the Toronto Regional Real Estate Board (TRREB), condo sales in the 416 area rose 0.2 per cent in October, totalling 883 units. But the average price for a Toronto condo located in the 416 tumbled nearly two per cent to $729,160.
By comparison, detached home sales fell 1.5 per cent, and prices surged more than eight per cent to close to $1.719 million.
It has been a rough year for condominiums. Overall, new condo sales in Toronto have plummeted 47 per cent year-to-date in 2023, sliding to their lowest levels in about a decade.
This comes one month after Altus Group data showed that condominium apartment sales in Toronto were 29 per cent below the ten-year average.
“While we are starting to see a resurgence in the market, one month does not make a trend,” said Justin Sherwood, the SVP Communications & Stakeholder Relations at the Building Industry and Land Development Association (BILD), in a statement. “Now is the time for stability. Stability in government housing policy ensures the industry operates in a predictable market to bring the housing supply to this rapidly growing region it desperately needs, and stability in interest rate policy will allow new home buyers to purchase with confidence.”
But while transactions have slowed, prices have not responded with a comparable decline. However, industry experts contend that the pause in price growth could be a sign that relief is on the way, a critical development amid rising interest rates. One of the contributing factors has been the growth in new and active residential listings, outstripping the increase in sales.
“The condominium apartment market is an important entry point into home ownership for first-time buyers. A better-supplied market has led to more choice for these buyers, resulting in more negotiation power and lower selling prices on average. A pause in price growth has helped mitigate the impact of higher monthly mortgage payments,” said TRREB President Paul Baron in a statement.
The Toronto Condo Market in 2024
At the same time, TRREB Chief Market Analyst Jason Mercer warned that Toronto condo market conditions could tighten in the second half of 2024 despite industry conditions becoming more balanced over the last 18 months.
The GTA population is growing at a record pace, and the consensus view is that we will start to see some relief in terms of borrowing costs beginning in 2024 and even more so in 2025.
TRREB Chief Market Analyst Jason Mercer
Other economists expect a notable decline in both the Toronto condo market and the broader apartment sector nationwide.
CIBC economists Benjamin Tal and Katherine Judge warned that the Canadian housing market is softening and is on the brink of “recessionary territory.”
“Unit sales reached a peak of 64,000 in early 2021 and are now down by 45%, leaving them 12% below their pre-pandemic decade-average level,” they wrote in a research note. “In per capita terms, activity looks even more depressed, with sales at lows not seen since the 2008 recession, outside of the early Covid lockdowns.”
On the condo front, new construction activity data show growth in multi-family construction on a per capita basis, even with a decline in investor demand. Indeed, recent numbers suggest that 40 condo projects that were poised to launch in the Greater Toronto Area (GTA) have been temporarily halted.
“Elevated interest rates and heightened market uncertainty continued to grip the new condominium sector in the GTA,” Shaun Hildebrand, president of Urbanation, said in a news release.
“While some new launches with competitive price points have seen success, many projects have been unable to make an economic case for proceeding in the current market, causing more supply to be put on hold.”
Additionally, the latest decline in Toronto condo presales suggests that a slowdown in construction is in the cards, even with permit issuance trending slightly higher.
The One
The latest news surrounding the iconic Toronto condo project in the heart of North America’s fourth-largest city raised some eyebrows. The One, a proposed 80-storey high-profile skyscraper at Yonge and Bloor, was placed into receivership in October due to failing to pay $1.6 billion in unpaid debts.
The development has faced a plethora of challenges, from a deal with Apple Store falling through to the pandemic-induced cost overruns and shortages to issues with lenders and financing firms.
“To say that the project has been delayed and faced challenges would be an understatement,” a court filing reads.
Does The One represent an issue for the broader Toronto condo market, or is this an isolated incident? For now, economists are not anticipating doom and gloom thanks to expectations of rate cuts by the Bank of Canada and swelling demand from higher immigration levels.
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