The Empty Condo Files: Solving the Mystery of Toronto’s Vacant Units

Grab your coffee, let's dive into this one—it’s a hot topic on everyone’s mind lately: What’s going on with the GTA condo market? You might’ve noticed all those "For Sale" signs hanging around a bit too long, especially when it comes to condos. It’s like the units are playing a game of hide-and-seek with buyers, and sellers are wondering why they aren’t getting snatched up.

Let me take you on a little journey.

The Curious Case of the Empty Condos

Picture this: a cozy condo in Toronto’s Harbourfront. It was listed for sale in the summer of 2022 at $480,000. Fast forward over a year, after four price reductions, and it still hadn’t sold—over 400 days on the market! Now, this isn’t just a one-off. Many investor-owned condos across Toronto are lingering unsold, reminiscent of what happened during the 2009 financial crisis.

But why are we seeing so many unsold condos? Well, part of it comes down to a perfect storm—rising borrowing costs, a surge in condo completions, and a market that’s not absorbing supply fast enough.

The Interest Rate Factor

Interest rates have been a thorn in the side of both buyers and sellers. In the not-so-distant past, buying a one-bedroom condo at $300,000 with a 2.7% interest rate seemed doable. Today, a similar condo might go for $550,000 with a rate of 5.3%, making the monthly mortgage payment skyrocket past $3,000. Rents, meanwhile, haven’t kept pace, leaving many investors stuck with negative cash flow.

What does this mean? Many of these investors are choosing to sell, flooding the market with units. But here’s the catch—not all of these condos were designed with homebuyers in mind. They’re smaller, investor-friendly spaces that don’t necessarily meet the needs of today’s buyers.

Small Spaces, Big Problems

Condos have been shrinking in size over the years. The average size has gone from 1,000 square feet in the 80s to around 650 square feet today. Some units are even as small as 275 square feet! For investors, these were once prime rental properties. But for homebuyers, especially millennials looking for larger spaces to work from home, start a family, or just stretch out—these smaller units just don’t cut it.

The Supply & Demand Dance

In the first half of 2024 alone, nearly 19,000 new condo units hit the market in the GTA—up 50% from the same period last year. It’s no wonder active condo listings have shot up by over 60%. But the uptick in supply isn’t being absorbed fast enough. Condo sales were down 25% from pre-pandemic levels in August, showing that the market is struggling to find balance.

Does this mean prices are crashing? Not exactly. Condo prices in the GTA have dropped about 2% over the past year—not a huge dip, but enough to make buyers perk up. Analysts predict a further decline in prices in the short term, especially as more units hit the market.

What’s Next?

Now, you might be wondering—what does all this mean for you? Well, if you’re a buyer, now could be your moment. There’s a lot of inventory, prices are softening, and interest rates, while still high, are expected to slowly come down in the next few years. Locking in a deal now with some of the incentives developers are offering might be a smart move. But remember, not all condos are created equal. Larger, family-friendly units are still in high demand, and those will hold their value better over time.

For sellers, if you’re sitting on a smaller unit, you’ll need to be competitive with your pricing or consider renovations to make your space more appealing to end-users. The days of quick, easy sales to investors are behind us, at least for now.

The Long Game

Real estate is cyclical. While things may seem a bit uncertain now, the market will eventually correct itself. If you’re in it for the long haul, patience will pay off. And who knows—2027 could be a whole different story as the market picks up momentum again.