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Calgary’s condominium market may be booming, but the Greater Toronto Area’s resale and new condo markets are facing steep challenges, a new report has found.
The recent study from CIBC Economics noted that new condo sales “have dived off a cliff” to their lowest level since the late 1990s.
The reason is low demand from investors, who typically have made up 70 per cent of sales in the Ontario region’s new and resale condominium markets.
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The study noted that prices remain too high for many investors, hampered by higher borrowing costs. At the same time, builders cannot add enough new supply due to higher construction costs and low demand.
Pre-sales — which determine whether a project will go ahead — have fallen to a 20-year low to 50 per cent in the Greater Toronto Area.
CIBC further noted most projects require more than 70 per cent of units pre-sold to be viable.
Although prices for new and resale condos in the Greater Toronto Area are down from their peak in late 2021 and early 2022, prices have not fallen enough to match market rents, the report pointed out.
As well, the share of new condos and resales that have become rental units in the secondary market have dropped to their lowest level in five years. CIBC further pointed out that the share of new condos with a mortgage that are cash-flow negative, if they are rented out, is now 81 per cent.
That’s up from 77 per cent in 2023 and 40 per cent in 2020.
In contrast, Calgary’s condominium market remains among the most active resale segments in the city with Calgary Real Estate Board statistics from late July showing year to date apartment sales increasing about eight per cent.
At the same time, the average price grew about 15 per cent to nearly $347,000.
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