Investment groups are snapping up newly built condos in the Greater Toronto and Hamilton Area. Photo by Peter J Thompson/National Post files

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Investment groups are snapping up newly built condos in the Greater Toronto and Hamilton Area at discounts averaging 40 per cent, as developers struggling to clear unsold inventory increasingly turn to bulk sales to move units.

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A new report from condo research firm Urbanation Inc. found that investment groups purchased 339 units in bulk transactions during the third quarter, accounting for 45 per cent of new condo sales. Overall sales doubled from a year earlier to 760 units, although activity remained 78 per cent below the 10-year third-quarter average.

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The investment groups paid an average of $763 per square foot, compared with original selling prices that were largely set during the market peak in 2021 and 2022, according to Shaun Hildebrand, president of Urbanation.

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In an email, Hildebrand said resale condo prices have since fallen nearly 30 per cent, helping explain the size of the discounts. Bulk buyers paid about 12 per cent less than the $866 per square foot averaged by resale units in recently registered buildings.

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Hildebrand said the buyers are private real estate investment firms and funds acquiring completed condos to operate as long-term rentals. He pointed to two publicly announced initiatives: High Art Capital’s provincially backed program targeting approximately 2,200 rental homes, and Jesta Group’s $500-million program targeting more than 1,000 units.

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“The developers are between a rock and a hard place,” said John Pasalis, president of Toronto-based Realosophy Realty.

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Pasalis said developers must continue paying condo fees and financing costs on completed units that remain unsold, even as prices have fallen.

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“It costs them to wait for buyers,” he said.

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Asked whether individual buyers could negotiate the same discounts as investment groups purchasing dozens of units, Pasalis said it was “probably unlikely.”

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“I think it’s one of the things that makes the market a little bit unfair to end users today,” he said.

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Completed and unsold inventory fell seven per cent to 5,127 units in the third quarter, the first quarterly decline in four years.

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However, inventory remained 40 per cent higher than a year ago and four times the level recorded two years earlier.

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Hildebrand said bulk buying reflects both pressure on developers and growing confidence among long-term investors.

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“These are long-term investors underwriting rental income and future value, and that kind of money typically moves in when pricing is near a floor,” he said.

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Even without bulk purchases, new condo sales increased 14 per cent from a year earlier, which Hildebrand said suggests the market may be finding a bottom, albeit from historically weak levels.

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Urbanation reported that pre-construction sales plunged 61 per cent year over year to just 60 units, marking the 12th consecutive quarter of annual declines.