Condos in southern Ontario still selling below asking even as demand improves

While condos are the most affordable home type in southern Ontario, sales activity has been stubbornly sluggish amid a downturn in the housing market, but a new report suggests demand is rising. 

Urbanation, a real estate research and consulting firm that specializes in the condo market, said the results of its second-quarter condominium market survey indicate that new condo apartment sales in the Greater Toronto-Hamilton Area increased 52 per cent annually to 702 units in the second quarter of the year.

The increase is, according to the survey, the first year-over-year gain since 2023. As for what’s behind the increase, Urbanation points to the elimination of HST and bulk investor buying as the main factor that’s lifting the struggling market from 35-year lows. 

In April, Urbanation said that in the first quarter of the year, only 246 condos were sold in the region, down over 50 per cent year-over-year and 94 per cent below the 10-year average for first quarter periods (4,046 sales). 

For the first time in at least 30 years, there were no new project launches during the first part of the year. 

Despite the most recent climb, the survey said sales were 86 per cent below the latest 10-year average for second quarter sales, saying buyers are still sitting on the sidelines due to uncertainty about the housing market and the delayed rollout of the province’s enhanced HST rebate.

Urbanation said almost all the gain in recent new condo sales activity came from completed projects, where sales more than tripled from a year ago to 535 units.

Some of these units were part of bulk sales to investment groups. 

Sales of pre-construction units are still down, dropping 80 per cent annually to 50 units. The drop in sales is, Urbanation said, related to the structuring of the HST rebate, as qualifying builds must break ground before March 31, 2027 and be close to completion by the end of 2029. 

As for prices for completed and unsold new condos, those decreased two per cent annually to an average of $1,186 per square foot. That’s more than the average resale price of a new condo (registered in the last three years), which hit about $830 per square foot. 

The report says units are generally sold for under-asking. 

According to the most recent data from the Toronto Regional Real Estate Board, the average selling price of a condo in the GTA was $630,688 in June, with units in Toronto selling for about $665,760. 

At the end of the quarter, 12,106 new and resale units were listed for purchase, up only one per cent from a year ago, the slowest pace of growth in three years. 

The survey said completed, developer-held inventory rose from 4,826 units in the first part of the year to a record-high 5,001 units in the second quarter, 68 per cent higher than a year ago. 

The movement of resale units has offset the glut of developer-held inventory somewhat, with smaller units changing hands more frequently than headlines suggest.

The survey notes that units under 600 square feet accounted for 20 per cent of active resale listings in the second quarter.

The survey said that as the market stabilizes, the outlook for future supply is becoming “more concerning,” as the number of new builds on the horizon is shrinking, with pre-construction and under-construction inventory falling to 48,710 units — down 37 per cent from a year earlier and a 62 per cent drop from the high of about 127,000 units in 2022. 

With new condo units being cancelled or postponed, a surge in demand and lagging supply could become an issue down the line. 

“After more than four years of decline, it’s an important signal to see new condo sales respond to the elimination of HST and investor activity,” Shaun Hildebrand, president of Urbanation, said in the survey.

“That said, this improvement is coming off an extremely low base, and pre-construction demand remains largely dormant. With virtually no new units being added to the pipeline, condo supply is set to see its largest ever decline in the coming years.”