Toronto’s condominium market is currently facing its most challenging period since the recession of the 1990s. This downturn is shaking the foundation of housing affordability and has the potential to significantly impact the economy in the Greater Toronto Area (GTA).
The recent analysis paints a grim picture of the state of the condo market, describing it as being in a “state of economic lockdown.” This dire situation has resulted from an amalgamation of high prices deterring investors—who traditionally account for a significant portion of presale buyers—and the inability of developers to reduce prices due to skyrocketing construction costs. Consequently, these factors have precipitated a sharp decline in new condo sales, plummeting to the lowest level observed since the late 1990s.
Moreover, the percentage of pre-construction condos that have been pre-sold has dipped below 50 percent, marking the lowest pre-sale rate in two decades. This decline in presales is stymieing the commencement of new construction projects, as a minimum of 70 percent of units must be pre-sold for construction to begin. This lag in the development of new condo projects is dramatically slowing the supply of new housing, further exacerbating an already strained market.
In the longer term, this slowdown is anticipated to lead to a substantial reduction in housing completions, stagnating the growth of the housing stock in Toronto. This reduction in available housing is poised to aggravate the affordability crisis, making it increasingly difficult for residents to find affordable housing options within the city.
Apart from the direct implications on housing affordability and supply, the downturn in the condo market also poses significant risks to the economy at large. A typical condo project in the GTA employs approximately 500 workers. However, due to the sharp decline in the number of new condo projects since 2022, nearly 40,000 jobs are at risk. The decrease in employment opportunities within the construction sector is likely to have ripple effects across the economy, impacting not just those directly employed in construction but also the broader community that relies on the economic activity generated by these projects.
In conclusion, the challenges currently facing Toronto’s condo market are multilayered, affecting not just investors and developers but also prospective homeowners and the economy at large. The ongoing slump in the market necessitates urgent attention and action to mitigate the adverse effects on housing affordability, supply, and the overall economic health of the GTA. The coming months and years will be critical in determining how effectively Toronto can navigate through these challenges and lay the groundwork for a more stable and affordable housing market.
