Preconstruction condo sales in Toronto have plummeted to levels not seen since the global financial crisis 15 years ago, prompting developers to offer unprecedented incentives to attract buyers.
A recent Urbanation report revealed only 1,461 preconstruction condo sales in the Greater Toronto and Hamilton Area (GTHA) so far this year—the lowest first-quarter sales since 2009, when only 884 units were sold. This marks a 71% decline compared to the average first-quarter sales over the past decade and an 85% drop from the first quarter of 2022, which saw 9,723 transactions.
The drop in sales is primarily due to high interest rates, which have increased construction and borrowing costs. Some buyers are unable to close on previously purchased units as they no longer qualify for loans. Since the market slowdown in 2022, 60 projects in the Toronto region, totaling 21,505 units, have been put on hold indefinitely.
“Most people don't know that a building cannot be built unless the developer sells at least 70 per cent of the units,” explained Simeon Papailias, managing partner of Royal LePage's REC Canada. "In the first quarter, only 1,500 units were sold in the entire GTA, with just seven out of 70 projects meeting their sales targets."
To entice buyers, developers are offering incentives such as reduced or free parking, lowered deposits, rental guarantees, and mortgage assistance programs. Christopher Castellano, VP of sales and marketing at Camrost Felcorp, highlighted his company’s successful incentive program, which covered two years of mortgage costs up to $90,000 for units priced under $1 million. New incentives are now being tailored to different buyer groups, addressing current market uncertainties.
Papailias noted that the current incentives are the best he has ever seen, predicting that buyers who take advantage now will benefit in the future as the market adjusts.
Matti Siemiatycki, director of the Infrastructure Institute at the University of Toronto, emphasized that project cancellations and delays could significantly impact housing supply. As demand declines and interest rates rise, developers face challenges in starting and completing projects, potentially leading to fewer homes available when the market rebounds.
Developers are careful to offer incentives without reducing the base price per square foot to avoid long-term market devaluation. Incentives such as free parking or temporary mortgage holidays are aimed at attracting buyers without altering the overall value of the units.
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