New condo sales in the Greater Toronto Area (GTA) fell to a 20-year low in the second half of 2022 as uncertainty crept into the market and affordability declined.

According to Urbanation's year-end Condominium Market Survey, just 5,419 new condo units were sold across the GTA between July and December 2022 -- a 68% annual decline -- as the "severe impact" of the Bank of Canada's interest rate hikes began to be felt. The figure is on-par with the lowest July-December sales total of the last 20 years, which was set during the 2008 financial crisis.

A strong start to the year kept 2022's new condo sales in line with the 10-year average, but, at 21,782 total units, sales were down 30% annually from the near record-high set in 2021. In Q4, sales were down 58% annually.

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With buyers hesitating, developers pressed pause on many projects that had been slated for release during the summer and fall. While 16,227 units were launched for pre-sale in the first half of 2022, just 7,669 units were bought to market in the second, a 48% decline from the latter half of 2021.

Although developers' cautious approach kept unsold supply in line with the 15-year average, unsold new condo inventory increased 30% year over year in Q4 2022.

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The market slowdown resulted in some price adjustment, but Urbanation noted that high development costs prevented any significant declines.

In Q4 2022, the average opening price for new launches fell 2% annually, to $1,329 per sq. ft, while the average asking price for unsold new condos fell 1% quarter over quarter, to $1,427 per sq. ft. Coming off the record high of $1,443 per sq. ft set in Q3 2022, the latter marked the first quarterly decline since Q4 2018.

Despite these year-end declines, the peak prices seen in early 2022 resulted in average new condo prices being up 8% annually in Q4.

A decline in average resale values -- they fell 14% between Q1 2022 and Q4, and were down 3% annually at the year's end -- led to the widest gap between prices for new and resale condos on record. At $580 per sq. ft, or 68%, the discrepancy far surpasses the previous gap of $332 per sq. ft set in Q4 2019.

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A total of 32K condo units were scheduled for completion in 2023, but that figure has now been revised to 25,406. It is still a record high, though, which will assuredly be met with correspondingly high demand.

As ownership affordability remains low -- interest rates have risen 4.25% in the span of 10 months -- and immigration is poised to soar, renters will account for much of the demand. While new and resale values declined, condo rents rose as much as 20% year over year in Q4 2022.

“The slowdown in condo presales in the second half of 2022 is expected to continue into 2023," said Shaun Hildebrand, President of Urbanation.

"[This] is at odds with the need to boost housing production in the GTA over the next decade to meet increasing immigration targets and alleviate current housing supply deficits."