The first quarter in 2023 was sluggish for the Greater Toronto and Hamilton Area (GTHA) multi-family residential market, according to new data released by Zonda Urban.
Sales of new condominium apartment and townhome units plummeted 72 percent compared to the first quarter of 2022. In Q1-2023, 2,664 units sold, paling in comparison to the peak of the 2022 market, when 9,639 units were sold, prior to the market absorbing the impact of interest rate hikes.
New condominium apartment sales slid 75 per cent, year-over-year, while new townhome sales were down 48 per cent.
Multi-family sales in the first quarter of 2023 follow similar trend lines reported in the summer of 2022 with activity moderately higher than the third quarter of 2022, but well below the pre-pandemic peak seen in early 2020.
Sales for new projects were on average $1,343 per square foot (PSF), which marks a year-over-year decline of three per cent.
Given the subdued demand, fewer new developments came to market. Only ten condominium apartments and three townhome projects launched in the first quarter of 2023, with developers scaling back in response to slow buyer activity.
That said, location and price point were alluring for motivated buyers, with more affordably priced units in primary locations still selling, despite the overall market downturn.
Most in demand were units priced below $1,200 PSF outside of the city of Toronto and below $1,400 PSF in the outer 416 region.
Notably, the bulk of new townhome units sold during the first quarter of 2023 were priced below $1 million, with stacked units in the Brampton sub-market comprising many sales.
Demand for homes below the $1-million mark continued to be robust. This is likely in part because home purchases under $1 million are eligible for mortgage default insurance, and therefore require lower down payments and insured homeowners usually receive a more favourable mortgage rate from their lender. This allows homebuyers to make their purchases more affordable and to stretch their house-hunting budget further.
Zonda Urban found that in the tepid market, developer incentives are playing an increasingly larger role, particularly in the new condominium apartment market, with 70 per cent of new condominium apartment developments offering buyer incentive packages.
Over the past few quarters, various incentives represent savings from two to four per cent of the purchase price, including both the new condominium apartment and townhome developments.
