Earlier this week, the Toronto Regional Real Estate Board (TRREB) released its first quarterly report for 2023, summarizing what shaped the GTA’s condominium market for the first four months of the year. Overall, the first quarter saw a decline in both total sales and new registrations compared to previous years, but while this period of decline may be nearing its end, the market resurgence is expected to have little impact on affordability .
Looking south along McCaul Street towards downtown Toronto, image by UrbanToronto Forum contributor bhwilkins
According to TRREB’s Multiple Listing Service (MLS), the GTA reported a total of 4,519 sales in the first quarter, down 42.9% from sales in the prior year’s first quarter of 7,909. The number of new listings also developed negatively to a lesser extent and fell by 19.9% to a total of 9,165.
One of the other notable trends in the first quarter was the increase in average GTA condo rental prices, primarily due to the combination of record immigration numbers and increased borrowing costs. For one-bedroom apartments, average rental prices rose 15.1%, while two-bedroom floorplans rose 9.2% to hit an exceptionally high $3,162.
“A year ago, when the Bank of Canada began raising interest rates, some prospective homebuyers turned to the rental market,” said TRREB Chief Market Analyst Jason Mercer. “Increased demand versus a limited supply of rental properties combined with significantly lower vacancy rates has resulted in average rent increases well in excess of inflation over the past year.”
Interestingly, while the added financial burden of higher borrowing costs initially pushed potential homebuyers into the rental market, the opposite trend has been observed in recent months. With rental properties now reaching prohibitive heights, many renters are returning to the condo-buying market.
“Recent Ipsos surveys for TRREB suggest that first-time buyers will pick up significantly this year, driven at least in part by double-digit rent increases over the past two years,” said TRREB President Paul Baron. “Despite rising interest rates, condo mortgage payments are now closer to the cost of rent for many prospective buyers. Additionally, home ownership has the added benefits of equity growth and wealth appreciation over the long term.”
Another factor that could contribute to this development is the current below-average value of condominiums in the GTA in Q1. Year-over-year, the median selling price for condos fell 11.4% to $700,566.
Looking ahead, Mercer commented that the tight market conditions should be a factor driving prices higher. “Home sales and selling prices are expected to improve throughout 2023,” he said. “Based on expectations for first-time buyer activity to pick up this year, the condominium segment should be among the frontrunners of the recovery in terms of sales and price growth.”
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