Sales of new condominiums in the greater Toronto area have declined by 19 percent in the second quarter of this year, while the average price per square foot reached a record high of $1,453, according to the latest report from real estate consulting firm Urbanation Inc.

 A total of 6,792 new condo units sold in Q2 of 2022, plummeting 24 percent compared to a year ago. Sales did however remain above the 10-year average. The drop in buying activity caused 11,703 new condo units to remain unsold. While new condo purchases slowed, the cost per square foot of these units surged by 20 percent on an annual basis, reaching an all-time high.

 Several driving factors were behind the price spike, including soaring construction costs, labour shortages, and higher-priced projects, according to the report. Looking ahead, rising interest rates and delayed approval timelines for projects will likely keep the cost of new condos elevated.

 “Prices are expected to hold firm amid low inventory and high development costs,” Shaun Hildebrand, president of Urbanation said in a press release on Tuesday. “The strength in the rental market and shift in demand towardsmore affordable ownership options should provide support for condominium activity as the market works through the effects of higher interest rates.”

The supply of presale condo units reached the third highest volume on record with 9,924 units to hit the market in Q2. The recent pullback in buying activity however has caused many projects to cancel or delay future launch plans. 

The data shows there were 35,000 new condo units anticipated to come to market for the region in 2022. In the first half of this year, roughly 16,000 units have launched and 10,000 more are expected, leaving 10,000 units on hold. Thisis a sign that the broader real estate slowdown has spread to the preconstruction market, where purchases are seenas bets on future housing because buyers wait years for their properties to be built.

Pre-construction buyers, the majority of whom are investors, have been spooked by the jump in interest rates even though they do not immediately need mortgages when they buy pre-construction condos. Typically, a 20-per-centdown payment is required to secure a pre-construction unit. The buyer pays the remainder after the condo is built.

 Urbanation estimates that, in the second half of this year, buyers of newly completed condos trying to recoup their expenses through rental income will face an average monthly shortfall of $1.06 per square foot, or the equivalent of nearly $700 per month on a 650-square-foot unit. By 2026, Urbanation predicts, that shortfall, or negative cash flow, will amount to $1.87 per square foot.