Toronto’s skyline continues to be littered with construction cranes working on new condo developments, but buyer interest in the units appears to be dwindling.
Sales of new condos in Canada’s largest city fell by a whopping 55% in the first quarter of this year compared to the same period last year, according to Urbanation Inc., a Toronto-based real estate research firm. On a quarter-over-quarter basis, sales of new condos were down 29%, the firm said.
Prices edged higher, but at a slower pace than historical norms. The price per square foot for a new condo was up 2.5% year-over-year in the first quarter, below the average 6.4% gain recorded over the past decade.
The condo market’s slowdown is being attributed to an overall cooling in the real estate market after a recent bout of outperformance throughout 2011 and 2012, said Shaun Hildebrand, senior vice-president at Urbanation.
Last year’s tightening of mortgage rules also resulted in fewer first-time buyers entering the housing market, which has dampened demand in the city’s condo sector.
“The industry has been cautious in bringing new units to market as sales center traffic has slowed,” said Mr. Hildebrand.
Toronto’s housing market, and in particular its condo segment, has helped Canada’s economy chug along in recent years while its developed peers have seen their real estate markets crash amid the global economic meltdown.
There are about 150 high-rise residential buildings currently under construction in Toronto, more than anywhere else in North America, according to Emporis, a German data provider.
Meanwhile, the number of unsold units in active condo development increased during the first quarter to 18,845, a 21% jump from a year ago, Urbanation said. The majority of those units are in projects still at the pre-construction sales phase, it said.
Mr. Hildebrand said condo sales should bounce back later this year, pointing at the city’s resale market as an early indicator of a recovering market.
But a look at the city’s resale market doesn’t paint a much rosier picture. Sales in that segment of the condo market were down 18% in the first quarter from the same quarter last year. Resale prices were also lower in the period, falling 0.5% to C$394 per square foot.