Toronto condo prices continue to level off amid tighter lending rules and a surge in new supply.

The average price per square foot of a resale condo in Canada’s biggest city rose 3.3 per cent to $520 in the first quarter from the same period last year, the weakest gain since 2014, according to market-research firm Urbanation Inc. The average price of a condo was up 3.6 per cent to $579,000 in the same period, the slowest rate of increase since 2015.

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“Condo prices are still being propped up by factors like high immigration, a strong job market, rising income, low borrowing costs, but we see demand starting to take a hit due to high prices, following a 45 per cent run-up over the past three years,” Shaun Hildebrand, president of Urbanation, said in a phone interview.

Hildebrand sees price growth capped at 6 per cent for the foreseeable future due to a wave of supply. A record 71,378 condo units were under construction in the first quarter, according to Urbanation.

The Toronto housing market took a hit last year after the government tightened mortgage-lending rules to ease rising debt and soaring home prices in the region. That pushed a lot of buyers into the cheaper condo segment, which saw prices jump as much as 11 per cent in the first quarter of last year.

Rents Ease

“The stress test is creating affordability challenges for first-time buyers plus single-family home prices haven’t become more competitive and growth for larger suites is also starting to slow down,” Hildebrand said. Price growth for smaller units is still well above average while growth for larger ones has fallen below average.

The average price of a three-bedroom condo reached $800,000 in Toronto in the first quarter, higher than the combined average price of $727,000 for semi-attached, row and townhouses in May. In contrast, prices averaged below $500,000 in the first quarter for studios and one-bedroom units.

Rent gains for Toronto condos have also been easing in the past few quarters and are expected to continue cooling amid a surge in completions of condo and purpose-built rental apartments, Hildebrand said.