GTA Condo Market Report Q3-2022

Data of new Q3-2022 Condo Market Report from Urbanation

Condo sales stalled significantly in Q3-2022 but a record number of new units are now under construction.

It’s no secret the sale of new condominiums in the Greater Toronto Hamilton Area (GTHA) is experiencing it’s next chapter. We’re witnessing a huge shift.

Urbanation, Toronto’s industry-leading GTHA real estate market research company, has released its new quarterly data for Q3-2022, revealing the scene. While some facts aren’t too rosy, others point to a continued, strong future for condo ownership in Toronto and its surrounding areas.

Here’s a general rundown of the report to help keep you informed, as an investor.

An empty stage: High interest rates led to a grand pause

Let’s look at the unavoidable negatives, first. Sales of new condominiums dropped by a stunning 79% in Q3-2022 annually to 1,748 units. Raised interest rates set by the Bank of Canada in an effort to curb pandemic inflation created a deteriorating financial scene. As a result, developers and presale purchasers paused, leaving the buying stage relatively empty. Simply put, the foot was taken off the gas as corrective market measures set in.

The GTA’s Q3-2022 Active Market

Record low sales and high pricing took hold

The market was stark. Records indicate condo sales in Q3-2022 were at their lowest levels since the financial crisis of 2009. In fact, a record high of two-thirds of all GTHA condo projects with available inventory reported zero sales in the last quarter.

There were just 2,857 new units launched for presale, which was down 67% from the same period last year. This was also 32% below the 10-year average for Q3 (4,181 units).

The average price for new condominiums sat at $1,427 psf, down 1% from the record high in Q2-2022. This being said, prices for new condos remained 15% higher than they were a year ago.

In comparison, the average price for resale condominiums declined 5% quarter-over-quarter and was down 10% from the record high reached in Q1-2022. At the end of September, resale inventory sat at 3.5 months of supply which is above the 10-year average of just 2.6 months, with units selling at a ratio of 97.8%, for notably less than their asking price.

GTA Resale Market 2022 Q3

Condo launches were delayed

Because of slow movement, around 10,000 condo units are expected to be delayed for launch this year. The absorption of new launches fell to 26%, which was also the lowest level seen since the financial crisis.  

An annual income of $135,000 was needed to buy the average unit

Rising rates and prices meant the face of condo buyers changed. Due to high interest rates, buyers who purchased the average new condo in Q3-2022 for $730K faced a mortgage of approximately $3,300 per month. This marked a 58% increase (+$1,200 per month) from condo mortgages a year ago, when interest rates sat at just 2%. 

According to Urbanation, when you factor in the qualifying interest rate and condo fees, buyers in this quarter needed to have annual incomes of $135,000 in order to buy the average priced unit, which was $42,000 more than was required just last year. This means many middle-class buyers were priced out of the market. 

There’s no doubt that Q3-2022 presented a challenging time for the sale of new and resale condos in the GTHA. 

The sale of condos in the GTA fell in Q3 2022

The good news: construction hit record highs

Yes, despite the sour news, there is some good in the picture. The total absorption of new condos in development remained high during Q3-2022 at 91%. In addition, unsold inventory declined 3% year-over-year and the running four-quarter sales total sat at 25,602 units, solidly treading water above the 10-year average.

One of the biggest positives in this quarter was the fact that construction kept pushing onwards despite all challenges. Record highs were attained. The construction of new condos in the GTA was up 40% year-over-year, reaching 96,510 units. Because of this push, a record volume of units readying for occupancy is expected next year as well as new condo deliveries, which should reach 18,677 units in the first half of 2023.

It’s also interesting to note that resale market values for units in recently registered buildings averaged $1,070 psf during this quarter. This was 41% higher than the average presale price for new units reaching occupancy witnessed last quarter.

New projects under construction in Q3 2022

Buyers were active in lower cost areas

People who bought new condominiums in Q3-2022 did so in lower cost areas that were more affordable, in an effort to push back against higher interest rates. Condo projects that were priced below the market average for new launches, (below $1,400 psf), accounted for two-thirds of sales.

Deals were found in Hamilton

Buyers searching for good deals last quarter found them in Hamilton. Here, condo projects were priced 30% below the GTA average. As a result, condo sales in this region represented 24% of all GTHA condo sales during Q3-2022. Much of this activity was due to the hundreds of units sold in the two towers that launched in Hamilton’s Design District.

Condo deals were found in Hamilton in Q3 2022

Going forward: a tricky playing field and a construction slow down

Urbanation predicts the 12-month delay now present between a new condo launch and the beginning of construction will lead to fewer condos entering construction in the latter half of 2023. While this will help to reduce the pressure from rising construction costs, down the road this is expected to lead to market imbalances. A record level of immigration is expected in the coming years and the market will need enough housing to meet this demand. Before this occurs, an upcoming rise in condo completions is expected to slow the increase in new condo prices. 

New project openings in Q3 2022

Lenders may require more than 20% down

According to Urbanation, the difference between the presale price for a newly completed condo and that of a resale condo in equivalent buildings will decline rapidly in the coming quarters. Because of this, lenders might begin to require more than the usual 20% down payment for investment properties.

In addition, the environment might discourage investors from holding onto their units. This situation could lead to more investors trying to assign their units prior to closing, which is a trend that’s already begun. Not a rumour, we’re seeing it today.

The takeaway

Overall, developers are expected to remain cautious when bringing a new supply of presale condos to the market in the coming quarters. This being said, the GTHA will continue to present an area with a high demand for rental condo living as the population rises and urban transformation presses forward into the future. The opportunity for investors to take advantage of condo investment and ownership remains positive in the long term.

At GTA-Homes, we take pride in presenting our clients with the information they need to make an informed decision. To learn more about the presale condo market and what you stand to gain in passive income, register below for our free Online Condo Investment Seminar to gain an inside perspective.