Why Toronto’s Huge Drop in New Condo Sales Is Good News for Buyers

Developers are sweetening the pot for homebuyers willing to purchase during a period of heightened interest rates and uncertainty.

By Josh Sherman | 3 minute read

Analysts say 60 new condo projects in the GTA have been put on hold since 2022 as developers are having trouble selling new units.

The start of this year was the slowest for new condo sales in the Greater Toronto and Hamilton Area since the Great Recession, but that’s created new opportunities for homebuyers as developers struggle to sell units.

Over the first three months of the year, developers sold 1,461 new condos, down a jaw-dropping 71% compared to the 10-year average for the first quarter, according to the Q1-2024 Condominium Market Survey from Urbanation, a real estate consultancy. That sales tally is the lowest number since the first quarter of 2009 — amid the global financial crisis — when just 884 units changed hands. “The market for new condominiums started 2024 where it ended off in 2023, very slow,” says Shaun Hildebrand, president of Urbanation, in the report. 

A souring sales outlook has made developers reluctant to launch pre-construction sales for any new projects. In fact, developers brought just four projects encompassing a total of 958 units to market between the start of January and end of March. “After two years of preconstruction sales trending down sharply, construction activity is being hit hard,” says Hildebrand. The projects that were launched were concentrated in the generally more affordable 905 region, leading to an average price per square foot of $1,168, a decline of 12% from the fourth quarter.

New Condo Buyers Are Scoring Bonuses

The sluggish new-build market might frustrate developers and their sales-office teams, but there’s an advantage for homebuyers who are looking for a brand new condo in one of the country’s most desirable real estate markets. Many developers are throwing in bonuses to entice potential buyers. “There was widespread use of incentives” in the first quarter, according to the Urbanation report. These incentives included free or discounted parking, mortgage-assistance programs, and looser deposit structures.

Barbara Lawlor, CEO of Baker Real Estate Inc., a pre-construction sales-and-marketing firm, is also seeing developers throw in free upgrades on units. “The incentive goodie box is really quite fascinating at the moment,” she tells Wahi. “It’s actually quite an amazing time to buy new condos — there are fabulous incentives out there,” she adds.

Lawlor understands that some buyers might be worried about higher interest rates. However, she points out that those purchasing new homes typically won’t be getting mortgages for several years down the road. “I know that a lot of people are concerned about the interest rates, but the reality is that most of the buildings that we’re selling today will not be occupied for a number of years, so there’s a lot of time for rates to come down as anticipated,” Lawlor, who has been selling pre-construction condos for more than 30 years, continues.

Lawlor also points out that these deals won’t be around forever and could quickly disappear if the market turns, something she saw first-hand during the ‘90s downturn. “I’ve sold through challenged markets before, and it happens almost overnight where the market one day is really challenged and the next day it just takes off,” she tells Wahi. “And the moment it takes off, there will be price increases.”

For now, of course, the market remains quiet. According to Urbanation, 60 condo projects, including a total of 21,505 units, have been shelved across the Greater Toronto and Hamilton Area since 2022. Like Lawlor, Hildebrand of Urbanation expects homebuying to increase at some point, though he suggests it will be a more gradual process. “While anticipated reductions in interest rates in the second half of the year should lead to some improvement in market conditions for new condominiums, activity will likely remain subdued as the industry works… through current inventory and digests the numerous government policies on housing recently released,” says Hildebrand.