Toronto Condo Market – Is rebounding enough?

Toronto Condo Market Struggled !

Condo sales in the City of Toronto slowed to a trickle to end 2022, but the market showed signs of bouncing back in the first quarter of 2023, data from the Toronto Regional Real Estate Board showed. Now the question is whether that recovery has legs.

TRREB’s quarterly condo report, released April 27, showed 2,961 condos were sold in Toronto proper in the first quarter. While that was down from 5,368 in the same period a year ago, the 2023 figures included two strong month-over-month gains of about 58 per cent in February and 48 per cent in March.

April data released on May 3 showed those sequential gains had slowed to three per cent, but the 1,453 units sold were nearly on par with last April’s total, the closest thing to a year-over-year gain in more than twelve months. Percentage gains in the wider GTA region were similar.

Prices have been on the rebound, too, eking out small gains for three consecutive months now, though April’s average price of $751,916 is still down from $820,835 a year ago.

TRREB’s condo report suggested the conditions were ripe for the market to strengthen throughout the year, in part due to a resurgence in first-time buying spurred by rising rents.

“Higher borrowing costs caused a temporary lull in condo buying activity. However, recent Ipsos polling for TRREB suggests that first-time buying activity will pick up noticeably this year,” Paul Baron, the head of the real estate board said.

The TRREB president said mortgage payments on a condo are now closer to the cost of renting for a lot of potential buyers, despite still-high interest rates.

“Based on the expectation that first-time buying activity will increase this year, look for the condominium apartment segment to be one of the recovery leaders in terms of sales and price growth,” said Jason Mercier, the board’s chief market analyst.

Average rents for condominium apartments in the Greater Toronto Area grew by at least nine per cent annually in the first quarter of 2023, as a result of strong population growth and high borrowing costs.

“The GTA condominium rental market continues to be a key source of rental supply, helping accommodate record population growth. However, tight market conditions are resulting in an unsustainable pace of rent growth,” Baron said.

Some would-be homebuyers turned to the rental market when the Bank of Canada started its interest rate hikes, causing demand to increase against limited supply of rental listings. While the rental market did benefit from an increase in listings, competition between renters remained intense, TRREB said.

As for whether this upward trend will continue onto the rest of the season, Mercer said the market follows a similar pattern from one year to the next, unless there’s a real shock to the system, such as the onset of interest rate hikes seen last year.

“If you think about just the regular seasonal nature of the market, I would expect to see stronger sales as we move through May and even June,” he said in an interview. “Even if you adjust for the time of year, I think we’re going to continue to see an upward trend in sales.”