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Earlier this week, the Toronto Regional Real Estate Board (TRREB) published their first quarterly report of 2023, summarizing what has characterized the GTA’s condominium market in the first four months of the year. As a whole, Q1 saw a decline in both total sales and new listings compared to previous years, but while this period of decline may be nearing its end, the resurgence of the market is expected to have little impact on affordability.
According to TRREB’s Multiple Listings Service (MLS), a total of 4,519 sales were reported in the GTA in Q1, which represents a fall of 42.9% compared to last year’s Q1 sales of 7,909. Meanwhile, the number of new listings also took a negative turn, but to a less significant degree, falling by a margin of 19.9% to a total of 9,165.
One of the other key trends of note in Q1 was the increase in average condo rental price in the GTA, driven largely by the combination of record immigration numbers and increased borrowing costs. For single bedroom apartments, average rent prices grew by a margin of 15.1%, while two-bedroom layouts climbed by a margin of 9.2%, reaching an exceptionally high mark of $3,162.
“A year ago, when Bank of Canada interest rate hikes commenced, some would-be homebuyers turned to the rental market,” said TRREB Chief Market Analyst Jason Mercer. “Increased demand up against a constrained supply of rental listings coupled with substantially lower vacancy rates resulted in average rent increases well-above the rate of inflation over the past year.”
Interestingly, while the added financial burden of higher borrowing costs initially had the effect of driving potential homebuyers into the rental market, the last few months have seen the opposite trend. With rental pieces now reaching unaffordable heights, many renters are returning to the condo purchasing market.
“Recent Ipsos polling for TRREB suggests that first-time buying activity will pick up noticeably this year due, at least in part, to double-digit rent increases over the past two years,” said TRREB President Paul Baron. “Despite increased interest rates, mortgage payments on a condo are now closer to the cost of renting for a lot of potential buyers. In addition, homeownership has the added benefits of equity growth and asset appreciation over the long term.”
Another factor that could be contributing to this trend is the current below-average value of condominiums in the GTA in Q1. Compared to last year, the average condo selling price was down 11.4%, falling to a mark of $700,566.
Looking ahead, Mercer commented that the tight market conditions should be a factor in driving up prices. “Home sales and selling prices are expected to improve as we move through 2023,” he said. “Based on the expectation that first-time buying activity will increase this year, look for the condominium apartment segment to be one of the recovery leaders in terms of sales and price growth.”
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