Just last week, condos in downtown Toronto dropped down to $997 per sq. ft, according to data provided to STOREYS by real estate brokerage Strata.
To put that figure into perspective, Robert Van Rhijn, Broker of Record at Strata Realty, explains that price per sq. ft hit a record high of $1,203 in February last year. This year, the metric peaked at $1,127 back in May, and has more or less been trending downwards ever since.
Van Rhijn adds that price per sq. ft hasn’t dipped below $1,000 since January 2021.
“It is seasonally driven, but I think it's mostly driven by the interest rate hikes and diminished buying power,” he says. “Because we're not just seeing a drop-off of the cost per sq. ft in December, it's been a steady decline since we got the two 25-basis-point interest rate hikes in June and July.”
In theory, lower price per sq. ft means a more affordable market for buyers, but the interest rate environment adds some nuance to the matter and Van Rhijn says softer prices aren’t enough to offset the higher costs of borrowing.
Van Rhijn also cautions that prices are likely to bounce back up soon. At the moment, he says agents in his network are reporting frustrated sellers who are either pulling their listings or opting to co-list on the rental market, where they’re tending to have a bit more luck.
“In November, we had 2,143 units available for sale downtown, and as of today, we have 1,821. So that's a 15% decline in inventory just over the past month alone,” he says.
“The fact that inventory is declining — that’s something that sellers should be very optimistic about and buyers should look at with some pause. As inventory levels decline, that will put more pressure on prices, so I think, right now, we're seeing a very brief dip below $1,000 per sq. ft.”
Looking ahead, Van Rhijn anticipates that pent-up buyer demand will present in a big way. He says buyers right now are “less pensive and more optimistic.”
“There are a growing number of pent-up buyers, and when buying power strengthens as a result of rates being cut, we are probably going to see the floodgates open,” Van Rhijn warns.
“And housing starts are pausing. We have all these new developments that are stalling and can't sell their inventory or get the green light to break ground and start building. So looking two years out, three years out, I think prices are only going to go up unless we can really ramp up the desperately needed inventory. But there are no good signs that suggest that that will happen anytime soon.”