A condo development in Toronto's Financial District.The Globe and Mail
Preconstruction condo prices fell 15 per cent in the Toronto region in the final quarter of 2024, as sales plunged to their lowest level in nearly three decades and a glut of unsold units hit a record high.
It was the worst year since the late 1990s for the preconstruction condo market, with investors souring on buying new units because they are no longer profitable.
There were only 4,590 preconstruction condo sales in the Toronto and Hamilton area last year, according to a report from condo research firm Urbanation Inc. released on Thursday. That was down 64 per cent from 2023 and represented the third straight year of declining sales. The last time volumes were this low was in 1996.
“The new condo market just experienced its toughest year in three decades,” said Shaun Hildebrand, president of Urbanation.
In the fourth quarter of last year, developers launched condo projects with an average asking price of $1,130 per square foot. That was down 15 per cent from the same period in 2023.
In the city of Toronto, the average asking price was $1,153 per square foot in the fourth quarter compared with $1,407 a year earlier. In the suburbs and region surrounding the city, the average asking price was $1,104 per square foot in the fourth quarter versus $1,183 in the previous year.
Prices started to decline in 2023 but this latest quarter was the steepest decline that Urbanation has tracked over the past two decades. The price drops are in addition to incentives such as a guaranteed rental income designed to attract investors who used to account for more than 70 per cent of preconstruction condo sales.
Investors have been facing financial problems with their units: Condo values are not appreciating and rental rates are not high enough to cover investors’ mortgage payments, condo fees and property taxes.
The volume of unsold condos in development, under construction and in recently completed buildings hit a record high of 24,277 units at the end of last year. That was an increase of 6 per cent over 2023 and 50 per cent higher than the 10-year average.
If the pace of sales remains at 2024 levels, Urbanation said it would take more than five years to clear the glut of inventory.
In the fourth quarter, developers launched sales for six new developments in the Toronto and Hamilton area with a total of 1,829 units. But only 10 per cent of the units in those projects sold during that period, a significant slowdown in the rate of sales. Over the past decade, developers launched an average of 6,123 preconstruction condo units in the fourth quarter with an average sales rate of 52 per cent, according to Urbanation.
Investor demand for condos has plunged while developers have finished constructing thousands of new units that were launched in prior years. Last year, there were 106 condo buildings totalling 29,800 units that were completed, a record high and 24 per cent above 2023. Urbanation estimates that this year will surpass 2024’s record with 112 buildings totalling 30,793 units completed.
Mr. Hildebrand predicted that this year will be another tough period for the preconstruction condo market as investors continue to bleed cash on their investments. He said this will soon lead to a “massive decrease” in new homes.
That is because lack of preconstruction condo sales means a drop in homebuilding in the future. This slowdown is occurring as federal and local governments try to ramp up building to help create more affordable housing for residents.
New condo starts have already begun to decline. In the Toronto region, there were 22,616 new condo starts last year, a 21-per-cent decline from 2023, according to data from Canada Mortgage and Housing Corp. In Hamilton, condo starts fell 39 per cent to 1,340 units year over year.