New home sales in the Toronto area have frozen, and condos have taken the hardest hit. The market is in uncharted waters, with sales at historic lows. In this post, I look at why this happened, what it means for buyers and sellers, and why I still see signs of recovery.
This post was written using Urbanation’s Q3 2024 report. The figures below are from that time, and the market has moved since then.
New Home Sales by the Numbers
According to Urbanation’s Q3 2024 report, new condominium sales in the Greater Toronto Area (GTA) fell 91% below the 10-year average. That is the lowest level in over two decades. Only 1,748 condo units sold during the quarter, a dramatic drop from usual activity (REM, Urbanation).
To put it another way, condo buying has almost stopped. For context on earlier months, see my July 2024 GTA new home market analysis.
Why New Home Sales Slowed So Sharply
Several forces are behind this slowdown in new home sales:
- Interest rates: There is hope for some relief after the recent rate cuts. However, the Bank of Canada’s earlier aggressive rate hikes cooled buyer demand as financing costs soared.
- Investor retreat: Investors typically account for about half of GTA condo ownership. Now they are leaving the market because higher borrowing costs and flat rental yields create negative cash flow (REM, Global News).
- Market oversupply: A backlog of nearly 40,000 condo units, including unsold and resale inventory, has made developers pull back on launches. It has also left buyers hesitant to commit (Urbanation).
Developers Hit Pause
The uncertainty affects developers as well as buyers. Many have paused new projects because presales are slow and costs are high. Approximately 40 planned condo developments in the GTA remain shelved. Together, they represent over 13,700 potential units that could have entered the market (Global News).
What Frozen New Home Sales Mean for You
For Buyers
For buyers, weak new home sales could signal a temporary chance to negotiate better deals. This is especially true in the resale condo market, which now competes with new builds that offer discounts to move inventory.
Still, a lower price is only one part of a good purchase. Check the condo fees, the reserve fund and the building’s age. Also compare a condo with other options. My guide on choosing a condo or a townhouse can help you weigh the trade-offs.
For Sellers and Developers
For developers and sellers, however, the challenge is harder. Pricing power has faded, while construction and financing costs remain high. As a result, sellers need realistic pricing and strong presentation to stand out.
Looking Ahead: Can New Home Sales Recover?
Despite the gloom, there are signs this freeze may thaw soon. Historically, real estate markets tend to stabilize once interest rates plateau. Many economists predict that could happen in early 2025. Developers are adjusting their supply plans, and further Bank of Canada rate cuts could restore buyer confidence.
In line with my earlier predictions, I expect the Toronto-area housing market to show signs of recovery by the end of this year. I also expect a more noticeable uptick in activity in the New Year. Pent-up demand and fewer new project launches could help balance supply and demand. Ultimately, that could lift new home sales out of the current slump.
Later reports did show a sharp rebound in resale activity. You can read about it in my post on the 40% jump in November home sales.
Conclusion
The market is tough right now. But it is also a chance for buyers and investors who are ready to act with a plan. Keep an eye on the big trends, and get good advice. Those two habits will help you through this changing market, whatever happens to new home sales next.
For official housing market data, visit CMHC and TRREB. Stay tuned as I keep analyzing these trends to help you make informed real estate decisions.
Sources: Urbanation, Real Estate Magazine, Global News
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Talk to a Mississauga Real Estate Agent
Do you have questions about what this means for your own plans? I am happy to help. Please contact me here or call 416 908 5600. A. Q. Mufti, Sales Representative, RE/MAX Real Estate Centre Inc., Brokerage.
Disclaimer: this article was published on 15 January 2025 and reflects the information available at that time. Interest rates, prices, and government programs change, so check the current position before acting on anything here. It is provided for information only and is not financial, mortgage, tax or legal advice. A. Q. Mufti is a registered Sales Representative with RE/MAX Real Estate Centre Inc., Brokerage, Ontario, Canada.
