New condo sales in the Toronto region fell to the lowest quarterly total since the 2009 financial crisis amid high interest rates and affordability issues, according to a new report.
The new Urbanation Inc. Report stated that there have been 1,461 pre-construction condo sales in the Greater Toronto and Hamilton region so far this year, marking the lowest number of transactions seen in the same period since 2009. In that year, only 884 sales had place in the middle of a global recession and housing collapse.
Toronto real estate expert John Lusink told CTV News Toronto on Wednesday that he’s been watching these patterns in real time on Condo.ca and Property.ca, where condo sales have slowed significantly.
“We are showing a decrease in the average sold per square foot. It’s down since the beginning of the year at least six percent, if not more,” he said, adding that one-bedroom condo listings on his sites, both for sale and rental, sometimes wait up to 32 days for potential tenants. and buyers.
The Urbanation report indicated Monday that year-to-date sales are down 71 percent compared to the latest 10-year average for first-quarter periods. This year’s first quarterly sale also represents an 85 percent drop from the first quarter 2022 peak of 9,723 sales.
The drop in sales is largely due to high interest rates making it difficult for people to make new purchases or even close out previously made purchases, Lusink said. Pre-construction buyers typically don’t get a mortgage until their condo unit is built, but sometimes when the unit is ready, they no longer qualify for a loan.
“We continue to receive notices from developers of buyers who cannot close. “These are transactions that some of our sellers would have done two or three years ago and are now close to closing, but they no longer qualify based on current rates,” he said. “The banks say ‘sorry, you know, either you put in more money or we won’t advance the loan.’ So those units will have to return to the market.”
Higher construction costs in some parts of the GTA have caused prices for new condos to continue rising despite a drop in sales, according to the report. Sales prices for unsold units in the GTA increased two percent from last year, averaging $1,161 per square foot, and continue to rise, according to the report.
Prices for remaining inventory in the 416 region decreased four percent year over year to an average of $1,522 per square foot, according to the report. Despite the decline, condominiums both inside and outside the city center remain unaffordable for potential buyers. At the current average price, a 600-square-foot condo downtown would cost a buyer more than $900,000.
In addition to high interest rates and unaffordable prices, Lusink said another factor slowing the market is that people’s income levels have not kept pace with real estate appreciation.
Urbanation’s report stated that since the market began to slow in 2022, it has found 60 projects, totaling 21,505 units, in the Toronto region that have been put on hold indefinitely.
So far this year, projects in preconstruction have a 50 percent sales rate, with an average of 61 percent in the first quarter of 2023 and 85 percent in 2022.
Many of the new condo builders are using “widespread” incentives, including free or reduced parking, no development tax, reduced deposits, rental guarantees and mortgage assistance programs, to encourage people to buy condos.
Lusink said many of the new investor-owned condos are being pushed into the rental market amid the slowdown.
“The buildings were already underway and are nearing completion, and a good portion of them are owned by investors and are being put up for rent,” he said. “Then there’s a whole group of projects that just get put on hold and wait.”