New Condo Prices in Toronto Have Dropped By Double Digits and Developers Are Worried

It's no wonder why home sales in and around Toronto have been tanking for months, but stakeholders are growing increasingly concerned with the snowballing impacts of a lack of market activity.

Inflated interest rates, an outrageously high cost of living and a floundering economy have pushed even the usual players (read: investors) far away from the real estate game, and it looks like it may finally be causing prices to drop for some housing types.

As the Building Industry and Land Development Association (BILD) notes in its latest report, sales remained low through last month, with seven per cent fewer new homes sold compared to the same time last year, marking a 50 per cent drop from our hot market's 10-year average.

These figures from the association of home builders and land developers are led by a drastic drop in new condo sales, with 20 per cent fewer sold in October 2023 than in October 2022 and the bleakest sales figures in 10 years.

As the group notes, while these dwindling sales in an already troubled market may seem like good news to would-be buyers, they will inevitably lead to delays in adding much-needed housing supply to the region, which is indeed already happening.

While some builders are giving away literal gold to attract buyers, dozens of new condo complexes that were on the way this year have been deferred, with the wealthy companies funding them "unable to make an economic case for proceeding in the current market."

"The impacts of slower sales will be lower future housing starts. The sooner the market gets indications that more moderate interest rates are on the horizon, the sooner we will see more added housing supply," BILD writes.

With tens of thousands fewer units coming to market than anticipated while immigration and thus demand for everything continues to boom, prices will end up higher even if they are easing slightly in the economically unstable meantime.

And easing, they are, at least when it comes to new condos in the GTA — according to BILD's latest data, the average benchmark price for these units just dropped 10.8 per cent year-over-year in October.

But even amid this trend and such low interest from buyers, the average price for a new condo is still a shockingly high $1,023,102, which BILD says will only get worse in this inflationary environment.

"The housing affordability crisis in the GTA has been driven by the lack of housing supply in the face of perennially strong demand," it wrote last month, noting the province's goal to build 1.5 million additional homes by 2031.

To the average citizen, though, this can feel like a no-win situation where owning a home in one's home city is forever out of reach: if buyers are eager, prices get driven up, especially if those buyers are investors, as they often are in the GTA.

And on the flipside, if investors and other buyers are sidelined, wealthy developers back off from new builds, and the resulting lower supply leads to the same end.

Luckily in the case of resale homes, the current lack of market attractiveness has meant a shift into more of a buyers' territory, where sellers are desperate and listings are plentiful: last month had 50 per cent more active listings than October 2022, per the Toronto Regional Real Estate Board (TRREB), but 5.8 per cent lower sales volumes.

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