Market Insight for April 26

New condo sales in the Toronto region have dropped to their lowest level since the 2009 financial crisis, with investors hesitating because of the lofty prices and higher borrowing costs.

A Monday news release from the market research firm Urbanation has counted 60 projects across the Greater Toronto and Hamilton Area (GTHA), that are delayed— meaning they were slated for launch and began releasing promotional materials but have since been put on hold.

These buildings make up 21,505 units that were expected to come to market, with anyone who bought a unit preconstruction now left in the lurch and facing rising home prices. That’s an increase from just over 8,000 delayed units across 31 condo buildings from last August.

New condo prices have been climbing as developers face higher construction costs. Although prices declined incrementally from the fourth quarter of 2023 to the first quarter of this year, some downtown Toronto projects have been selling for a minimum of $1,800 per square foot. That means a 500-square-foot studio would cost $900,000. That is unattractive for prospective homeowners who plan to live in their condo, as well as for investors, who make up the bulk of the preconstruction purchases.

Buyers can find cheaper and larger condos that have already been built. Existing square footage is so much cheaper. So far this year, there were 9,568 preconstruction sales, according to Urbanation. That marked the lowest volume in 10 years. The reasons for the delays are high interest rates and lack of confidence in the market. But it is worth noting that most new condos are now in the 905 rather than Toronto proper.

Of the 17,076 units across 56 projects that Urbanation says have released marketing materials ahead of a planned launch in the next few quarters, 70 per cent were in the 905 area code. Outside of Toronto, Urbanation counted 1,581 delayed units in Brampton, 1,434 in Hamilton, 1,420 in Vaughan and 1,288 in Markham. The list is rounded out by Mississauga (928 delayed units), Oakville (884), Milton (728), Whitby (579), Richmond Hill (400), Clarington (365) and Newmarket (303 units).

“Developers need to sell at least 70 per cent of the units before starting construction. Projects are unable to attract sales at prices required by developers to earn a return,” said Shaun Hildebrand, president of Urbanation.

While interest in single-family homes and resale condos appears to be picking back up after high interest rates and the cost of living increases undermined sales last year, there hasn’t been the same return of buyers for new construction condos, a housing type that used to be popular among investors.