2024 – where we're at and how we got here

The condominium apartment market in the Greater Toronto Area has softened considerably since April 2022, especially over the last six months. New condo sales were down about 35 per cent annually in the GTA in 2023 and about 55 per cent from 2021.

As a result of the COVID-19 pandemic and its fallout, we experienced rapid inflation and the Bank of Canada’s response – higher interest rates. Higher borrowing costs have shifted the current landscape from what Toronto real estate investors have been accustomed to, consistent upward trending prices.

Room to negotiate

Each quarter, Bullpen Research and Consulting, puts together our GTA High-Rise Lands Insights Report, which includes looking at new condo prices as they relate to land value. As potential new condo buyers, you should know that the most successful launches in the GTA recently have come to market at summer 2021-level pricing. If you’re actively looking for a new unit, make sure to hire an experienced real estate agent who understands where the current market value is, and avoids overpriced projects where developers have not adjusted to this new high interest rate real estate climate. There is room to negotiate on incentives, as well.

Bullpen continues to underwrite numerous development opportunities on behalf of developers and lenders, many builders remain bullish on the long-term prospects of the GTA highrise market, and many investors foresee a long-run housing scarcity. Based on the slow sales over the last 20 months, a housing deficit in 2026-27 will be evident. This will further drive up rents and cause resale prices to rise rapidly.

It is difficult to think that far out, but this situation has occurred previously. We saw this same lagged response to poor absorption activity occur in 2017, as new condominium sales were very slow in the pre-construction market in 2013, which translated to extreme undersupply four years later. Prices and rents were rising so rapidly in Toronto, the Liberal government at the time expanded rent control, added a foreign buyer tax and undertook several other measures to cool the market.

Positive signs

To avoid the slow pre-sale condo market and attempt to time their occupancy with the undersupply projected for 2027-28, many developers are trying to better understand the rental market, with Bullpen conducting many rental studies intended for use in their CMHC financing applications. We’re likely to see more rental starts in 2024, but fewer condo apartment starts. There is a clear opportunity to capitalize on deals where developers are very close to getting the sales they need to finance their project. Research not only the prices, but the developer and their ability to deliver a project.

There were some positive resale figures released for January, but continued poor new home sales figures. Buyers of both existing and new homes continue to grapple with uncertainty, with a spectrum of positive and negative factors to weigh. With many developers still planning spring 2024 launches, these new openings will tell us a lot about investors’ outlook on the market and developers’ confidence in securing the necessary sales to qualify for construction financing. If you do your homework, there are still wise investments to make. Good luck.