New condo sales in the Greater Toronto Area (GTA) have taken a nose dive compared to the same time last year, falling by a staggering 79%.

The latest numbers from Urbanation revealed a total of 1,748 new condo sales during the third quarter of the year -- vastly different than the 8,320 sales seen during the third quarter of 2021. This marks the second-lowest quarter for new condo sales in the GTA since the first quarter of 2009 during the financial crisis when there was 887 sales.

With interest rates continuing to climb throughout the third quarter, many would-be homebuyers moved to the sidelines, pushing sales down further. A record 189 projects in development reported zero sales during the quarter, which represents a 67% share of total projects with available inventory.

“Condo investors and developers adopted a wait-and-see approach to determine the impact on the market from higher interest rates, resulting in very little sales activity in Q3," said Urbanation President Shaun Hildebrand.

In response, some developers have delayed launching new projects. Presale launches were down 67% year over year, with just 2,857 new units launched, which sits 32% below the 10-year average for Q3. And what does get brought to market is being absorbed at a much lower rate, with sales absorption falling to a more than a decade low of 26%.

The report notes that although there has been more presale launch activity during Q4 of this year with 4,591 units already launched in October, "the market remains on track to see approximately 10,000 units delayed for launch this year."

Interestingly, despite the decline in new condo sales, Urbanation is not predicting a slowdown in construction activity across the GTA until the second half of 2023.

"Developers will remain active in the next few quarters starting work on the large number of units that launched and sold in previous quarters," the report reads. "The 8,953 new condominiums that started construction in Q3-2022 was up 40% year-over-year and represented a record high for the GTA, pushing the total number of units under construction to a record 96,510."

Hildebrand noted that although the surge in construction "was a positive sign for new supply, it will ultimately be short-lived unless market confidence improves.”

Despite record development, inventory levels remained relatively low with 12,943 unsold units available at the end of the quarter. This is down 3% from the 13,408 units that were available at the end of Q3 in 2021. Because of this low inventory, there has been an upward pressure on new condo prices, with projects that launched for presale opening with a record-high average price of $1,380 per sq. ft, based on an average unit size of 642 sq. ft.

"While the average price for all available units in the market at $1,427 psf in Q3-2022 declined by 1% from the record high in Q2-2022 ($1,440 psf), prices remained 15% higher than a year ago ($1,244 psf)," the report reads.