The Toronto condo market has been experiencing significant shifts in 2024, especially in the new construction segment, which has hit a 27-year low in sales during the second quarter. This downturn marks a crucial point for both the resale and presale markets. Let's explore the current landscape and the factors influencing these trends.
A Sharp Decline in Sales
The most startling revelation of 2024 is the dramatic decrease in new construction condo sales in the Greater Toronto Hamilton Area (GTHA). According to a report by Urbanation, a renowned real estate research group, sales plummeted to just 1,688 units in Q2 of 2024, a drop of 66% year-over-year and 70% below the 20-year average.
Inventory and Pricing Discrepancies
Toronto's condo market, particularly in the downtown core areas coded as CO1 and CO8, has traditionally been robust. However, the current landscape shows an oversupply, with inventory levels reaching 8 to 10 months. This glut is primarily due to a slowdown in buyer activity, which hasn't kept pace with the amount of new listings hitting the market.
Pricing between new construction (presale) condos and resale condos is increasingly divergent. Resale condos are currently priced between $900 to $1,100 per square foot, whereas new constructions in the same areas are seeing prices range from $1,400 to over $1,800 per square foot, with some projects even launching at $2,200 per square foot.
Economic Factors at Play
The disparity in pricing can be partly attributed to the rising costs of construction and development charges, which prevent new condo prices from adjusting downwards as quickly as the resale market. This situation is exacerbated by high interest rates, which affect the affordability and investment appeal of condos, particularly for investors who make up a substantial portion of the presale market buyers.
Market Predictions and Adaptations
The current conditions suggest a cautious approach for both buyers and sellers in the Toronto condo market. Sellers need to be strategic in pricing and presenting their properties, considering the high competition. On the other hand, buyers find themselves in a favorable position to negotiate better deals, given the abundant choices and softening prices.
Implications for the Future
The ongoing recessionary phase in the condo market and its potential long-term effects on the Toronto real estate landscape cannot be underestimated. With new projects struggling to meet sales thresholds necessary for financing, future construction could slow down significantly, affecting housing supply and economic activity in the construction sector.
As we look towards the latter half of 2024, stakeholders in the Toronto condo market—be it developers, investors, or potential condo buyers—must navigate this complex environment with a detailed understanding of market dynamics and economic indicators. The decisions made today will undoubtedly shape the city's urban development and economic health in the coming years.
A Sharp Decline in Sales
The most startling revelation of 2024 is the dramatic decrease in new construction condo sales in the Greater Toronto Hamilton Area (GTHA). According to a report by Urbanation, a renowned real estate research group, sales plummeted to just 1,688 units in Q2 of 2024, a drop of 66% year-over-year and 70% below the 20-year average.
Inventory and Pricing Discrepancies
Toronto's condo market, particularly in the downtown core areas coded as CO1 and CO8, has traditionally been robust. However, the current landscape shows an oversupply, with inventory levels reaching 8 to 10 months. This glut is primarily due to a slowdown in buyer activity, which hasn't kept pace with the amount of new listings hitting the market.
Pricing between new construction (presale) condos and resale condos is increasingly divergent. Resale condos are currently priced between $900 to $1,100 per square foot, whereas new constructions in the same areas are seeing prices range from $1,400 to over $1,800 per square foot, with some projects even launching at $2,200 per square foot.
Economic Factors at Play
The disparity in pricing can be partly attributed to the rising costs of construction and development charges, which prevent new condo prices from adjusting downwards as quickly as the resale market. This situation is exacerbated by high interest rates, which affect the affordability and investment appeal of condos, particularly for investors who make up a substantial portion of the presale market buyers.
Market Predictions and Adaptations
The current conditions suggest a cautious approach for both buyers and sellers in the Toronto condo market. Sellers need to be strategic in pricing and presenting their properties, considering the high competition. On the other hand, buyers find themselves in a favorable position to negotiate better deals, given the abundant choices and softening prices.
Implications for the Future
The ongoing recessionary phase in the condo market and its potential long-term effects on the Toronto real estate landscape cannot be underestimated. With new projects struggling to meet sales thresholds necessary for financing, future construction could slow down significantly, affecting housing supply and economic activity in the construction sector.
As we look towards the latter half of 2024, stakeholders in the Toronto condo market—be it developers, investors, or potential condo buyers—must navigate this complex environment with a detailed understanding of market dynamics and economic indicators. The decisions made today will undoubtedly shape the city's urban development and economic health in the coming years.
