Condo completions in Canada's largest city are set to pass last year's record number, but finding buyers today is a different story, a reality that could impact apartment supply for years to come.
New condo sales totalled 567 in the Greater Toronto Hamilton Area, or GTHA, in the third quarter, according to data from condo research firm Urbanation of Toronto. That's the lowest quarterly sales total since the first quarter of 1995, according to the company.
New condo sales, generally made up of presold high-rise units to be built down the road, fell 81% from a year ago and were 87% below the latest 10-year average in the third quarter, said Urbanation.
New condominium sales reached 3,641 units over the first three quarters, down 63% from last year and 84% below the same period in 2021, according to Urbanation says. The GTHA new condo market is on track for its slowest year since 1996.
"The new condo market is facing its toughest challenge in decades," stated Shaun Hildebrand, president of Urbanation, in a commentary. "Investors are inactive and end-user buyers currently have plenty of lower-priced options to choose from in the resale market. It may take a while, but conditions will gradually improve as developers hold back supply, construction inventory continues to drop, and demand rises with declining interest rates," he said.
Statistics Canada reported this year that 38.9% of condominium apartments underway were investment properties, making them likely to land in the rental market that Canada Mortgage and Housing Corp. has said is undersupplied.
In the third quarters, unsold condominium units in various stages of development decreased 4.4% quarter-over-quarter from the record high of 25,018 units in the second quarter to 23,918 units, Urbanation said. That's the most significant quarterly decline in unsold inventory in two-and-a-half years. The drop was mainly due to a lack of new project launches, with only one project with 177 units brought to market in the third quarter, the firm said.
Urbanation also said unsold inventory contained 11,629 units in preconstruction projects, 11,356 units in under-construction projects, and 933 units in completed projects.
Conversions to rentals
Some condominium apartment projects are now converting to purpose-build rental units that typically means one entity would own the entire building as opposed to individual investors. Those projects have proven popular with institutional investors.
Among active new condominium projects previously launched for presales, Urbanation said three with 1,111 units were converted to purpose-built rentals.
Eight projects totalling 2,231 units were put on hold, scratched or placed into receivership during the third quarter, the firm said.
Over the past two years, 33 new condominium projects totalling 6,796 units that were actively selling were either converted to rental, put on hold, canceled or went into receivership, the research firm said.
Condominium completions are on track to reach 24,386 units in 2024, surpassing the record high of 24,114 completions. They are projected to reach another record high of 29,409 units in 2025 before declining in the years that follow, Urbanation said.