The Toronto condo market experienced a drastic slowdown in sales at the end of 2022, but the first quarter of 2023 has shown promising signs of recovery. According to the Toronto Regional Real Estate Board (TRREB), 2,961 condos were sold in Toronto during Q1 2023, down from 5,368 in the same period last year. However, the figures included two strong month-over-month gains of about 58% in February and 48% in March, leading many to wonder if the rebound has staying power.
TRREB’s condo report for Q1 2023 suggests the conditions are ripe for the market to strengthen throughout the year, with first-time buying activity expected to increase due to rising rents. The head of the real estate board, Paul Baron, said that higher borrowing costs caused a temporary lull in condo buying activity, but recent polling suggests that the activity will pick up noticeably this year.
The TRREB president also noted that mortgage payments on a condo are now closer to the cost of renting for many potential buyers, despite still-high interest rates. He expects the condominium apartment segment to be one of the recovery leaders in terms of sales and price growth throughout the year.
While the average prices of condos have been on the rebound for three consecutive months, April’s average price of $751,916 is still down from $820,835 a year ago. However, the TRREB report suggests that this trend is likely to change as conditions become favorable for price growth.
In the first quarter of 2023, average rents for condominium apartments in the Greater Toronto Area grew by at least 9% annually due to strong population growth and high borrowing costs. The rental market benefited from an increase in listings, but competition between renters remained intense.
Looking ahead, TRREB’s chief market analyst, Jason Mercier, believes that the market follows a similar seasonal pattern from one year to the next, unless there is a real shock to the system, such as the onset of interest rate hikes seen last year. He expects to see stronger sales in May and June, as with typical spring markets before the pandemic. However, Tom Storey, a sales representative for Royal LePage Signature Realty, believes that seasonal patterns will reemerge this year after disruptions caused by the pandemic and interest rate hikes
Storey also noted that demand is still highest for one-bedroom and one-plus-den units, indicating that the more affordable segment of the market is driving sales. While he expects a run-up in sales during May and June, he does not expect blockbuster numbers.
Overall, the Toronto condo market is showing signs of recovery in Q1 2023, with the potential for further growth throughout the year. Market conditions are becoming more favorable for first-time buyers, with mortgage payments on condos now closer to the cost of renting. As population growth continues and borrowing costs remain high, the rental market will likely continue to be a key source of rental supply, but the pace of rent growth is unsustainable. Whether the upward trend will continue into the rest of the season remains to be seen, but experts believe that the market will follow a similar seasonal pattern from one year to the next.