Navigating new condo purchases in a shifting market

As a prospective condo buyer in 2024, it’s crucial to understand that the market is currently in flux. However, this reality creates a silver lining: Opportunities for those who do their homework will naturally emerge during uncertain times in the market. The dramatic price surge in 2021 and 2022 – fuelled by low interest rates, inflation and investor-driven demand – has led to significant pricing disparities across new condominium projects today. While many developers are still clinging to the prices of the past, the reality is that the market is now undergoing a gradual but extended correction.

Realistic perspective

Until recently, borrowing costs were rising, and the speculative demand that once pushed prices up is waning. Developers are reluctant to cut prices, particularly to protect upcoming project closings and avoid backlash from previous purchasers. However, with the influx of new condo completions expected in 2025, alongside increased rental construction, there will be added downward pressure on prices. This environment presents an opportunity for savvy buyers to negotiate deals, particularly on projects nearing completion or in resale markets where values may have flattened.

While some developers are overly optimistic about a quick market recovery by 2025 or 2026, it’s essential to approach your purchase with a realistic perspective. The market will likely see moderate price adjustments over the next few years. As a buyer, staying informed about market trends and looking at comparable resale values can help you find a competitively priced unit, providing long-term upside potential as the market eventually stabilizes.

However, there are also positive signs on the horizon for new condominium buyers. Numerous economists forecast that the Bank of Canada may implement several interest rate cuts soon, particularly as inflation is below the two-per-cent target in most provinces. If this happens, it would create a more favourable borrowing environment, potentially lowering mortgage costs and making new condo purchases more attractive.

Moreover, immigration levels in Canada are at historic highs, with the population increasing by over one million people nationally and more than 500,000 of them settling in Ontario during the last 12 months. This surge in demand, combined with a relatively limited supply of new housing, is expected to create more competition for available units, pushing up values over time. Buyers entering the market today are well-positioned to benefit from this demographic growth, especially if they secure a unit before the next wave of demand fully takes hold.

Future undersupply

Finally, the slowdown in new condo sales during 2023 and 2024 has set the stage for a potential supply shortfall by 2027 and 2028. The decreased number of projects in the pipeline, combined with fewer cranes visible on the Toronto skyline, suggests that a future undersupply is likely, which could drive up resale prices and attract investors back into the market. Those who buy now, at a time of market adjustment, may see significant returns as the market recalibrates and demand outstrips supply in the coming years.

In short, the current market offers deals for buyers willing to research and compare options carefully. By focusing on real value, keeping an eye on the broader economic and demographic trends, and being patient, you can secure a better purchase price in this period of market adjustment while positioning yourself for future growth as market conditions improve. Good luck.