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A condominium development at the corner of The Esplanade and Church St. in Toronto, on May 27, 2020. Sales in the GTA were down 85 per cent compared with the same period last year, which Urbanation said was attributed to fewer project launches.

Fred Lum/The Globe and Mail

New condo sales in the second quarter in the Toronto region fell to their lowest level since the Great Recession, as developers stopped launching projects when the COVID-19 pandemic shuttered the economy and slowed home building.

The largest residential market in the country had a total of 1,385 new condo sales in April, May and June, according to Urbanation, an industry group which tracks condo building trends in the Greater Toronto Area. That was the weakest activity since early 2009 when the global economy cratered after the U.S. housing crash.

The sales were down 85 per cent compared with the same period last year, which Urbanation said was attributed to fewer project launches. Over the second quarter, six projects totalling 1,176 units were launched. That was down substantially from the same period last year when 40 projects totalling 11,415 units launched.

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“There was a delay in launches. Everyone was apprehensive due to COVID,” said Rodrick Wallace, a realtor with IPRO Realty, who works with condo investors and home buyers.

The average selling price of new condos across the GTA weakened to $889 per square foot from $903 a year ago, with four of the six new projects outside of the expensive downtown core.

Quarterly New Condominium

Apartment Sales

Greater Toronto Area, Q2 2008 to Q2 2020

Sales lowest since Q1 2009

12,000

10,000

8,000

6,000

4,000

2,000

0

Q2

Q1

Q1

Q1

Q1

Q1

Q1

Q1

Q1

Q1

Q1

Q1

Q2

‘08

‘09

‘10

‘11

‘12

‘13

‘14

‘15

‘16

‘17

‘18

‘19

‘20

JOHN SOPINSKI/THE GLOBE AND MAIl

SOURCE: urbanation inc.

Quarterly New Condominium

Apartment Sales

Greater Toronto Area, Q2 2008 to Q2 2020

Sales lowest since Q1 2009

12,000

10,000

8,000

6,000

4,000

2,000

0

Q2

Q1

Q1

Q1

Q1

Q1

Q1

Q1

Q1

Q1

Q1

Q1

Q2

‘08

‘09

‘10

‘11

‘12

‘13

‘14

‘15

‘16

‘17

‘18

‘19

‘20

JOHN SOPINSKI/THE GLOBE AND MAIl

SOURCE: urbanation inc.

Quarterly New Condominium Apartment Sales

Greater Toronto Area, Q2 2008 to Q2 2020

12,000

Sales lowest since Q1 2009

10,000

8,000

6,000

4,000

2,000

0

Q2

Q1

Q1

Q1

Q1

Q1

Q1

Q1

Q1

Q1

Q1

Q1

Q2

‘08

‘09

‘10

‘11

‘12

‘13

‘14

‘15

‘16

‘17

‘18

‘19

‘20

JOHN SOPINSKI/THE GLOBE AND MAIL, SOURCE: urbanation inc.

Noëlla Ingabire, a realtor with Re/Max Condos Plus, said she is selling more townhouses now than condos. She said her condo investors are looking for deals but there are none to be had in downtown Toronto.

Condo weakness is also playing out in the resale market where they have shouldered steeper sales declines than detached and semi-detached houses. In June, condo sales in the Toronto region were down 16 per cent compared with last year, though the average selling price was up by 7 per cent to $631,704, according to the local real estate board. In contrast, resales of detached houses climbed and the average selling price soared above $1-million in the city and the surrounding suburbs.

“It will take a few more months to tell how much underlying housing demand has been permanently impaired by the recession,” said Robert Hogue, senior economist with Royal Bank of Canada. “This is especially true for the new condo market where first-time home buyers and investors play significant roles,” he said.

It has been harder for first-time home buyers to get a big enough mortgage to buy in Toronto, with home prices climbing and increasingly stricter loan qualifications. In the first half of this year, first-time home buyers accounted for fewer mortgage registrations in Ontario than in the same period during the Great Recession, according to new data from Teranet, which operates the province’s electronic land registry system.

For investors, who make up nearly 40 per cent of condo owners in the Toronto region, the investment strategy of covering mortgage payments with rental income or expecting prices to climb is less compelling. The pandemic has slowed migration to the city, dried up tourism and slashed jobs. That, coupled with an influx of new condos and Airbnb units turning into long-term rental apartments, has pushed rental vacancies slightly higher and rental prices down.

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“The investment strategy of most condo investors has, for the most part, not been about cash flow, it’s mainly been about speculative future price growth,” said Carl Gomez, an independent real estate economist. “If investors do not feel confident about the potential direction of condo prices in the future, then they will bail today. And I think that’s exactly what they are doing,” he said.

Mr. Wallace said he is telling his condo investors to stay away from preconstruction condos in downtown Toronto at the moment given the price per square foot and softening rental market. “It is probably not the best investment right now,” he said.

Despite the lacklustre second quarter, the surge in resales and home building in June has given developers confidence to launch projects this year. Urbanation said it expects to see an improvement in the third quarter. So far, more units were launched in July than in the entire second quarter.

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