Tight rental market and first-time buyers expected to drive renewed growth
The Toronto Regional Real Estate Board (TRREB) has reported a decline in sales and prices of condominium apartments in the first quarter of 2023.
The figures show a 42.9% decline in sales compared to the same period in 2022, with 4,519 sales reported.
The average selling price for condominium apartments sold in Q1 2023 was $700,566, a drop of 11.4% from the average of $790,418 in Q1 2022.
However, TRREB expects a rebound in sales due to strong population growth, tight rental market conditions, and first-time buyers.
TRREB chief market analyst Jason Mercer said that the condominium apartment segment will be one of the recovery leaders in terms of sales and price growth. The board anticipates that home sales and selling prices will improve as the year progresses, with the condo market experiencing renewed growth in sales and price due to an expected increase in first-time buying activity this year.
According to TRREB president Paul Baron, higher borrowing costs have caused a temporary lull in condo buying activity.
“Higher borrowing costs caused a temporary lull in condo buying activity. However, 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," he added.
However, the recent Ipsos polling for TRREB suggests that first-time buying activity will pick up noticeably this year, at least in part due to double-digit rent increases over the past two years.
Despite the increased interest rates, Baron said that mortgage payments for a condo are now comparable to the cost of renting for many potential buyers.
In addition, homeownership provides added benefits of equity growth and asset appreciation over the long term.
In the first quarter of 2023, the strong population growth, coupled with high borrowing costs, continued to put pressure on the GTA condominium apartment rental market, according to TRREB.
Although there was an increase in listings, competition among renters remained intense, with average rents growing at double-digit or high single-digit annual rates.
TRREB reported that there were 10,525 condominium apartment rentals reported through MLS in Q1 2023, a 4.0% increase compared to Q1 2022.
Despite more supply, market conditions remained tight enough to support a 15.1% year-over-year increase in the average one-bedroom condominium apartment rent, which amounted to $2,474. The average two-bedroom rent increased by 9.2% over the same period to $3,162.
Mercer cited recent polling that showed a significant number of renters are considering buying property due to the rising monthly rent, indicating that there is still a shortage of available properties in both the rental and ownership markets.
According to Baron, the GTA condominium rental market continues to be a crucial source of rental supply, but tight market conditions are causing an unsustainable pace of rent growth.
He added that to balance things out, more supply is needed, and much of this supply should come in the form of purpose-built rental properties. The development of rental properties needs to be an explicit part of housing policy at all levels of government.
