Another month, another slump for Toronto’s condo market

On this day four years ago, the average price of a condo across the Greater Toronto Area (GTA) sat just below $800,000, having skyrocketed amid the buying frenzy of the COVID-19 pandemic.

It seemed the market was on an unending upward trajectory, with record-low interest rates helping fuel an enormous year-over-year increase in prices as investors rushed to snag a rental unit.

But now, new data from the Toronto Regional Real Estate Board (TRREB) shows the average price has tumbled to $626,650 – a dive of about 21.7% from its 2022 peak – as the stunning correction at play in the city’s condo market continues.

GTA condo sales last month slid to 1,088, a drop of more than 60% from the same time four years back, as investors and other buyers continued to desert the market in droves.

Other property types – detached, semi-detached, and townhouses – are also seeing activity and prices contract sharply as economic unease and affordability challenges take their toll.

Still, none have been as dramatic as the condo market’s woes, which aren’t expected to end anytime soon.

Despite some cause for optimism in certain pockets of the Toronto real estate market, mortgage broker-owner Mike Kazarian of Lenders’ Choice Mortgages doesn’t see green shoots in 2026 for the condo sector – even though it will eventually recover.

“A lot of builders have stopped construction so inventories are going to be lower, and where are we going to house people?” he told Canadian Mortgage Professional. “That’s going to be the problem in the next three, four years. So I think the condo market will turn around – but that’s going to take time.”

Builders, investors in the lurch as condo crunch continues

In February 2022 in Toronto, 784 condos were sold in a price range between $700,000 and $799,999. By last month, the number of condos sold in that range had slipped to just 88, with an ever-growing number of condos in the $300,000 to $499,999 window.

Plunging values are creating much-publicized problems for buyers who purchased preconstruction condos years ago, only to find that the property is worth much less than they agreed to pay.

If a lender isn’t willing to offer a so-called blanket appraisal, that can potentially leave buyers on the hook for huge amounts of money – up to hundreds of thousands of dollars in some cases – as they scramble to make up the difference between the sale price and what lenders are willing to fund.

“The most common solutions are: A, they’ve got to come up with cash,” Kazarian said. “If they can’t come up with the cash, which is not always easy… some people are just going to have to walk away and they’re going to get sued by the builder. And that’s really unfortunate.”

Others still are going back to the builder in an effort to negotiate a lower price, knowing that those companies also face challenges when a growing number of buyers in a building suddenly can’t qualify for a mortgage.

Toronto condos continue to weigh down overall national outlook

The sluggishness of Toronto’s condo market means the city continues to drive a wider slowdown in housing across the country, with other regional markets faring better.

Part of the reason for the sector’s recent malaise has been a jump in interest rates since 2022, spiking the cost of borrowing and – as rents continue falling – suddenly turning many investment properties into a cashflow-negative burden for owners.

A drop in the federal government’s immigration targets has also curbed rental demand and removed some buyers from the market.

“It’s ironic, because we had a housing shortage until the government decided to reduce the number of immigrants,” Dominion Lending Centres (DLC) chief economist Sherry Cooper told CMP in late February. “And the population growth has just plummeted, which is never good for housing either.

“So it’s a combination of many factors. And the one that gets the least attention and probably deserves the most attention is this sudden shift in population growth. Because much of what was built was purpose-built rental.”

Source CMP
By Fergal McAlinden