The Toronto Regional Real Estate Board (TRREB) recently reported that in the first quarter of 2023, sales of condominium apartments and the average selling price declined year-over-year.
However, the board expects the condo market to experience renewed growth in sales due to strong population growth, tight rental market conditions, and first time buyers.
Lower sales and prices in Q1 2023
According to TRREB, there were 4,519 condominium apartment sales reported through MLS in Q1 2023, a 42.9 per cent decline from the 7,909 sales reported in Q1 2022. New listings also declined by 19.9 per cent over the same period.
The average selling price for condominium apartments sold in Q1 2023 was $700,566, down 11.4 per cent from the average of $790,418 in Q1 2022. The City of Toronto accounted for approximately two-thirds of GTA condo sales, with the average selling price in Toronto at $726,664, down by 10.3 per cent compared to the same period in the previous year.
Expected bounce-back in sales and price
TRREB Chief Market Analyst Jason Mercer expects the condominium apartment segment to be one of the recovery leaders in terms of sales and price growth.
The board predicts that the housing market conditions will continue to tighten in the Greater Toronto Area (GTA) as the year progresses, with home sales and selling prices anticipated to improve. Based on the expected increased first-time buying activity this year, the condo market should see a resurgence in sales and price growth.
Reasons for the decrease in sales and prices
TRREB President Paul Baron explains, “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 due, at least in part, to double-digit rent increases over the past two years.”
Despite the increased interest rates, Baron notes mortgage payments for a condo are now comparable to the cost of renting for many potential buyers. In addition, homeownership provides added benefits of equity growth and asset appreciation over the long term.
Strong condo rent growth continues in Q1 2023
In the first quarter of 2023, the strong population growth, coupled with high borrowing costs, continued to put pressure on the GTA condominium apartment rental market, according to TRREB.
The market benefited from an increase in listings, but competition among renters remained intense, with average rents growing at double-digit or high single-digit annual rates.
Condo rentals on the rise
TRREB reported that there were 10,525 condominium apartment rentals reported through MLS in Q1 2023, a 4.0 per cent increase compared to Q1 2022.
Rental listings also increased by 10.2 perc cent year-over-year, outstripping growth in rental transactions. Despite more supply, market conditions remained tight enough to support a 15.1 per cent year-over-year increase in the average one-bedroom condominium apartment rent, which amounted to $2,474. The average two-bedroom rent increased by 9.2 per cent over the same period to $3,162.
Mercer explains, “A year ago, when Bank of Canada interest rate hikes commenced, some would-be homebuyers turned to the rental market. Increased demand up against a constrained supply of rental listings coupled with substantially lower vacancy rates resulted in average rent increases well above the rate of inflation over the past year.
Mercer cites recent polling that shows that a significant number of renters are considering buying property due to the rising monthly rent, indicating that there is still a shortage of available properties in both the rental and ownership markets.
More supply needed
Baron says that while the GTA condominium rental market continues to be a crucial source of rental supply, tight market conditions are causing an unsustainable pace of rent growth.
He adds, “To balance things out, more supply is needed. Much of this supply should come in the form of purpose-built rental properties. The development of rental properties needs to be an explicit part of housing policy at all levels of government.”
