Toronto's condo boom took a big breather in the first quarter of this year.

Sales plummeted by 55 per cent in the first three months of 2013 over the same period last year, as developers held back new project launches and took a wait-and-see approach in the face of a softening market and climbing inventory of condos for sale.

A total of 2,728 new units were sold up to the end of March, down 29 per cent just from the final three months of 2012. That's less than half the 6,070 units sold in the first quarter of 2012 when the condo market was starting to come down from a record year of sales — 28,190 units — in 2011.

“Developers have been very disciplined. There were barely any new project openings and they are being very selective in what they do launch,” says Shaun Hildebrand, senior vice-president of condo market research firm Urbanation, which released its state-of-the-condo-market report Monday.

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New project launches so far this year are the lowest since the fall of 2009, in the wake of the Great Recession.

“Given the sales numbers we saw in 2011 and up until the early part of 2012, which were on fire, that type of momentum had to give,” said Hildebrand. “The rebalancing now taking place is beneficial for the longer term stability of the market.”

While most of those 2,728 new units — some 79 per cent — already have buyers, the inventory of unsold units in new projects climbed during Q1 to 18,845 units, a 21 per cent jump over a year ago, Hildebrand notes.

Most of those unsold units, about 64 per cent, are in buildings still in the pre-construction sales phase, meaning they have yet to be built.

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Price gains, which have averaged 6.4 per cent annually over the last decade for new condos, have slipped significantly: the average index price of a new unit was up just 2.5 per cent in Q1, year over year, to $533 per square foot, now the same average price per square foot as resale condos, says Urbanation.

But the market has avoided, so far at least, the major collapse in prices that many housing watchers had been anticipating since last summer when the condo market started softening in the face of the euro crisis and tightened mortgage lending rules imposed by Ottawa that forced many first-time buyers to the sidelines.

The big fear was that panicked investors, who are believed to account for at least 30 per cent of new condo purchases, especially in Toronto's core, would flood the already shaky market.

Instead, most seem to be renting their units out. So far they've been able to command hefty rents, especially from the growing number of young professionals keen to live downtown.

Those rents are likely to flatten out — along with a levelling out of new condo prices — over the next couple of years in the face of competition, as more new units come on stream, notes Hildebrand.

Some 26,500 new condos are slated to occupy this year alone across the GTA, but the actual number is unlikely to exceed 18,000 as project completions get pushed into 2014 or beyond because of a lack of construction crews, an ongoing bottleneck that has had the intended effect of keeping a lid on supply.

“Projects that are well priced and located are still doing very well,” he adds, noting that some “highly anticipated projects” launching in the next few months could see sales improve by years' end.

It should be clearer by the end of May how sales of projects launched so far this year are doing, but early indications are that first-time buyers are looking again, especially in the 416 region, says Jim Ritchie, vice-president of Tridel, which hopes to start construction on its Ten York project by the end of 2013 and has sold 620 of the building's 694 units.

Developers are now looking to hopeful signs on the resale condo front, says Hildebrand, where sales were up 9 per cent in the first three months of 2013, over the final quarter of 2012, after months of double-digit declines, seen as the first real indicator that consumer confidence may be picking up.