In a notable twist for the Toronto real estate market, downtown condos have dipped below $1,000 per square foot (PSF) for the first time since January 2021. Right now, condos here are selling for roughly $999 PSF — a significant change, largely driven by a series of interest rate hikes and a cost-of-living crisis that continues to squeeze Canadian households.
Declining condo prices in the downtown core certainly imply that the market is slightly more affordable than it was during the pandemic-induced frenzy that saw housing prices soar. But for many buyers, property values would need to come down further to offset the higher cost of borrowing.
There are many cautious buyers waiting on the sidelines, creating pent-up demand that must eventually be released. And with many economists predicting the Bank of Canada will begin cutting interest rates in 2024, the concern is that many buyers will rush back into the market, forcing us to relive those competitive months of early 2022. That’s when virtually every property was attracting five to 10 offers, selling well above asking.
Adding to the complexity, Toronto’s housing shortage still persists. This is further exacerbated by several pre-construction projects stalled this past year. Needless to say, as we head into 2024, Ontario faces a difficult road to hitting its goal of building 1.5 million new homes by 2031.
For instance, recent changes to the urban boundaries of some municipalities means greater swaths of land are no longer available for housing. Market demand has consistently called for more single-family homes. But by not identifying land for infrastructure developments (and not building them now), Ontario has little hope of ever hitting its housing targets. Thus, the scarcity challenge continues, with slim chance of bringing real estate prices down to more affordable levels.
For pre-approved buyers, the fact that downtown condos are now selling below $1,000 PSF may signal a rare moment of opportunity. After all, this is a notable decline compared to the market’s peak in February 2022, when units downtown commanded a staggering $1,203 PSF.