"A Record High": Nearly 26,000 New Condo Units Going Unsold In GTHA

Amid daunting borrowing conditions, unrelenting prices, and sales that have sagged to close to a 30-year low, new condominium inventory continues to sweat on the Greater Toronto and Hamilton Area’s market, new data from Urbanation shows.

The research and consultancy firm released its latest analysis on the GTHA’s condo market on Thursday, revealing that unsold inventory hit “a record high” in the second quarter of 2024. Some 25,893 units were unsold by the end of June, and that figure is over 60% higher than both the 10-year and 20-year averages for the metric.

“When measured against sales over the past 12 months, unsold inventory equalled 34 months of supply — roughly three times higher than a balanced level of 10-12 months. In the past year alone, months of supply nearly doubled,” the report says. “Most unsold inventory was in pre-construction projects with a total of 15,157 units, compared to 9,788 unsold units under construction, and 948 unsold units in recently completed buildings.”

Urbanation attributes the build-up of inventory to a “drop in sales” over the quarter, with 1,688 transactions recorded. That figure is down 66% annually and comes in 70% below the 20-year average for the metric. It also represents “the lowest Q2 result of the past 20 years outside of the initial months of COVID-19 in Q2-2020,” when 1,671 sales were recorded.

Taking stock of the first half of 2024: the firm reports that just 3,159 new condo units changed hands between January and June, and that figure marks the “slowest first half for new condo sales since 1997,” according to the report. It’s also down 57% from last year’s level, and 72% below the 10-year average.

On the pre-sale side, just 3,625 units were launched in Q2, and of those, only 17% were sold. That absorption rate represents the lowest for an opening quarter in over 25 years.

One of the big barriers would-be buyers continued to face in the quarter was “sticky” new condo prices, the report explains, pointing to “high development and financing costs, and record prices paid for land at the market peak” as some of the reasons why developers have budged very little on the price-side. In fact, average asking prices for unsold units, at $1,361 psf, have come down just 2.6% over the past year and by only 4.5% over the past two years.

“With condo prices still near record highs and only a modest 25 basis point decline in interest rates in June from their 22-year high, buyers remained cautious in anticipation of further rate cuts and amidst a burgeoning supply of units for sale,” says Urbanation President Shaun Hildebrand. “The continued weakening in condo market conditions during the second quarter of 2024 is likely to cause more projects that were slated to launch this year to remain on hold, while others that are struggling to meet sales thresholds for construction financing may ultimately be pulled from the market.”

Although Thursday’s report doesn’t mention just how may projects have been delayed or cancelled as of the second quarter, the previous rendition of the report (for the first quarter) said that around 60 new condo projects that were on track to launch since the market began to slow down in 2022 are now “on hold indefinitely.” Those 60 projects would have added some 21,505 new housing units to the region, and were already being marketed to the public when they were put on hold.