Toronto’s condo market is undergoing a significant shift, with prices for condo apartments experiencing their sharpest decline in years. The average condo price in December 2024 fell to $741,000, marking a 1.5% year-over-year decrease. While this represents a rare drop in a historically resilient segment, it also reflects broader changes in market dynamics and buyer behavior.
This article delves into the reasons behind the price decline, the factors shaping the condo market, and what this means for buyers, sellers, and investors navigating these evolving trends.
The Numbers: A Closer Look
In December 2024, condos accounted for 29% of all residential sales in the Greater Toronto Area (GTA), with 972 units sold. New listings for condos rose by 8.2% year-over-year, reaching 2,400 units, contributing to an overall increase in supply. Despite the growing inventory, sales remained steady, highlighting continued interest in the condo market even as prices softened.
The rental market, however, tells a different story. The average monthly rent for a one-bedroom condo rose to $2,750, up 6.4% year-over-year, while two-bedroom units reached $3,400, reflecting a 5.8% increase. This surge in rental demand has created opportunities for investors, even as buyers benefit from declining purchase prices.
Why Are Condo Prices Declining?
The decline in condo prices can be attributed to several key factors. The first is affordability concerns, as many buyers, particularly first-time purchasers, have struggled with high borrowing costs. While recent interest rate cuts have provided some relief, the earlier increases in 2023 limited purchasing power for many.
Additionally, the condo market is facing an oversupply in certain areas, particularly in neighborhoods with high concentrations of new developments. This surplus has created downward pressure on prices, especially for older units that compete with modern, amenity-rich properties. Sellers of such units have been forced to adjust their pricing to attract buyers, contributing to the overall decline.
Investor activity also plays a role. Some investors, wary of market volatility, are offloading their units, further increasing inventory levels. At the same time, other investors are shifting their focus to the rental market, where strong demand and rising rents provide reliable income streams.
The Surge in Rental Demand
The rental market is thriving, driven by population growth and immigration. Toronto’s population grew by over 120,000 residents in 2024, with many newcomers opting for rentals as they establish themselves in the city. This influx has created fierce competition for rental properties, particularly condos, which offer desirable locations and amenities.
Economic factors are also at play. Potential buyers who have been priced out of homeownership are choosing to rent instead, further fueling demand. Condos, with their proximity to transit and urban centers, remain a preferred choice for renters, pushing rental rates higher and vacancy rates lower.
A Buyer’s Story: Finding Opportunity in a Declining Market
Aaron, a 28-year-old IT professional, had been renting a one-bedroom condo in downtown Toronto for $2,800 per month. When condo prices began to decline, he decided to explore purchasing a property. In December 2024, he bought a one-bedroom unit in Liberty Village for $735,000, securing a fixed mortgage rate of 4.6%. His monthly mortgage payment now closely matches what he was paying in rent, but with the added benefit of building equity.
Aaron’s experience underscores how declining condo prices are creating opportunities for buyers to transition from renting to owning, particularly in neighborhoods with strong infrastructure and amenities.
For Buyers: Navigating the Condo Market
For buyers, the declining condo prices present a unique opportunity to enter the market at a more affordable price point. Areas like North York, Scarborough, and Etobicoke offer a mix of affordability and accessibility, making them attractive options for first-time buyers. However, buyers should remain cautious and focus on properties with strong rental and appreciation potential, as oversupply in certain neighborhoods could limit long-term value.
Thorough research and due diligence are essential. Buyers should consider factors such as building maintenance fees, which average $0.65 per square foot, and proximity to transit and amenities, as these can significantly impact a property’s appeal and resale value.
For Sellers: Adapting to a Changing Market
Sellers in the condo market face challenges that require strategic adaptation. Pricing competitively is critical in attracting serious buyers, particularly in a market where inventory levels are rising. Sellers should also consider minor upgrades, such as fresh paint or modern fixtures, to enhance their unit’s appeal.
Marketing efforts should emphasize the property’s unique features, such as energy-efficient appliances, building amenities, or proximity to key attractions. For investors selling tenanted units, showcasing rental income potential can attract buyers seeking reliable income streams.
What Lies Ahead for the Condo Market?
Experts predict that the condo market will stabilize in 2025 as interest rates remain steady and buyer confidence improves. While oversupply may continue to challenge certain neighborhoods, population growth and strong rental demand will support long-term value. The growing preference for urban living, coupled with Toronto’s expanding transit network, will likely sustain interest in condos, particularly those near major infrastructure projects.
Toronto’s Condo Market: Challenges and Opportunities
The sharp decline in condo prices reflects a market in transition, shaped by affordability challenges, increased inventory, and shifting buyer behavior. While these trends present challenges for sellers, they also create opportunities for buyers and investors to capitalize on lower prices and rising rental demand.
As we move into 2025, the condo market’s trajectory will depend on how effectively supply and demand balance out. For now, Toronto’s condos remain a dynamic segment of the real estate market, offering both challenges and opportunities for those willing to navigate its complexities.
