After a year filled with its own share of challenges, stemming from inflation concerns, interest rate hikes and overall economic uncertainty, the Greater Toronto Area (GTA) condo market faced one of its most challenging years in history, according to a new report from Urbanation.
Released Thursday, the report revealed that not only did new condo sales plummet in 2023, but developers were also left with the most inventory of unsold new condos ever.
The reverberations of 2023 rippled through the GTA’s condo market, which witnessed a considerable 41 per cent decline from 2022 in new condo sales, hitting a 15-year-low of 12,716 units.
This stark descent, compared to 2022’s 21,433 units and 2021’s 30,619 units ushers in a narrative of unprecedented challenges.
According to the report, Toronto faced a 48 per cent dip in sales in the fourth quarter of 2023, a more than 20-year low in sales, while the 905 region experienced a more moderate 30 per cent decline, marking a five-year low. Notably, the 905 region’s market share of new condo sales increased to 49 per cent in 2023 from 41 percent in 2022 , underscoring shifting buyer preference.
The lack of new condo sales last year resulted in condo developers sitting on a record number of unsold units. Unsold inventory swelled to a high of 22,477 units in the fourth quarter of 2023, marking a 41 per cent increase from the previous year. This worked out to be 21.2 months of supply, which is twice as high as needed for a balanced market, according to Urbanation.
Construction at a sluggish pace
Construction activity mirrored the market’s wane, witnessing a sizable 45 per cent decline in project starts compared to 2022. What’s more, the latter half of 2023 was hit with a 72 per cent drop in construction starts, signifying a pronounced slowdown.
Meanwhile, new condos that reached occupancy managed to hit a three-year high in Q4 of 2023 (20,165), while condo completions are slated to ascend in 2024, with a record high of 26,934 units scheduled for occupancy.
Pricing predicaments lead to adjustments and incentives
Prices for unsold new condos also hit a two-year low in the GTA, falling 2 per cent annually to $1,403 per square foot. In Toronto, unsold prices were down 4 per cent to an average of $1,524 per square foot, while rising 1 per cent annually to a record high $1,186 per square foot in the 905.
However, lower prices led to burgeoning incentives in the fourth quarter, with condo developers increasing cash-back offers and reduced deposits in a bid to stimulate demand.
“2023 was one of the most difficult years for the GTA condominium market in recent history,” said Shaun Hildebrand, president of Urbanation.
He said that while some improvement in sales activity can be expected in 2024 “given record-high population growth and an expected reduction in interest rates,” the GTA condo market will continue to encounter obstacles as it works through a substantial volume of completions this year.
“Looking forward a few years from now, the sharp reduction in new condo sales and construction starts experienced in 2023 will create severe supply shortages for the market,” added Hildebrand.