Toronto's once-booming condo market is currently facing significant challenges, with a steep decline in sales and a surplus of unsold units. This downturn has raised concerns among developers, workers in the construction industry, and potential homeowners alike. The following blog outlines the key issues facing the market, based on recent reports and expert opinions.
Decline in Condo Sales
The Greater Toronto Hamilton Area (GTHA) has experienced a dramatic drop in condo sales, reaching a 27-year low in the first half of 2024. Urbanation Inc.’s Q2-2024 Condominium Market Survey reported just 1,688 sales in the second quarter, representing a 66% year-over-year decline. The first half of 2024 saw only 3,159 units sold, a staggering 57% decrease from the previous year. This decline has led to a record-high inventory of 25,893 unsold units, most of which are in pre-construction projects.
"With condo prices still near record highs and only a modest 25 basis point decline in interest rates in June from their 22-year high, buyers remained cautious amidst a burgeoning supply of units for sale. The continued weakening in condo market conditions during the second quarter of 2024 is likely to cause more projects that were slated to launch this year to remain on hold, while others that are struggling to meet sales thresholds for construction financing may ultimately be pulled from the market."
Urbanation President | Shaun Hildebrand
Impact on Construction
BNN Bloomberg reports that the decrease in condo sales is having a direct impact on the construction industry. Developers rely on pre-sales to secure financing and begin construction, but with sales at a historic low, many projects are being delayed or even canceled. The Canadian Home Builders' Association (CHBA) reports that builder sentiment in Ontario has reached an all-time low, with a Housing Market Index (HMI) of just 11.6 out of 100. This low confidence suggests that the province may see a significant drop in housing starts in the coming years, exacerbating the housing supply crisis.
Challenges for Developers and Investors
Developers are feeling the strain as they struggle to meet sales thresholds required for construction financing. The uncertainty in the market has also led many investors to exit, further reducing demand for new units. John Pasalis, president of Realosophy Realty, noted that while the market was once driven by investors, the current environment has made it difficult for them to achieve positive cash flow, leading to a pullback in investment. This shift is expected to result in fewer completions of new units over the next few years, contrary to the need for more housing in the region.
Impact on the Workforce
For construction workers, these market conditions translate into fewer projects and potentially less job security. The slowdown in new builds means that many tradespeople may find themselves with reduced opportunities as developers hold off on starting new projects. This is particularly concerning in a city like Toronto, where the construction industry plays a crucial role in the local economy.
Future Outlook
Looking ahead, the Toronto condo market is expected to remain challenging. With high interest rates and cautious buyers, the recovery may be slow. The real estate market is facing a delicate balance between supply and demand, with developers and construction workers caught in the middle. While there is hope that the market will eventually stabilize, the current trends suggest that the industry will need to adapt to a new reality of lower demand and increased competition for fewer projects.
The Toronto condo market’s slowdown is a clear indicator of broader economic challenges. For those in the construction industry, it presents both a challenge and an opportunity to innovate and find new ways to thrive in a changing market. As developers, workers, and investors navigate these uncertain times, the focus will need to be on strategic planning and resilience to weather the storm and emerge stronger when the market recovers.
