Toronto condo crisis: Why a full-blown meltdown looks unlikely for now

A once-booming Toronto condo market has been plunged into crisis over the past year amid plummeting demand and cooling prices – a slowdown that’s also spreading to other cities including Vancouver.

A flood of new inventory is expected to hit the market in the summer and add to the number of empty units across the city, potentially putting further pressure on condo values and deepening the problems facing investors.

Through the 2010s and early 2020s, purchasing a pre-construction condo in Toronto was viewed as a safe bet because of high rental demand, particularly among international students, while soaring prices promised a lucrative profit when the apartment was sold down the line.

But that outlook has soured thanks to significantly lower immigration and rising interest rates, meaning mortgage costs on condos have jumped even as their values slid and demand tumbled.

The sharp pain in Toronto’s condo sector makes it one of the “pockets of concern” across Canada’s housing market, according to Canada Mortgage and Housing Corporation (CMHC) deputy chief economist Aled ab Iorwerth (pictured below) – but he’s stopping short of diagnosing a full-scale crash.

That’s partly because there are noticeably fewer cranes in the sky across Toronto as a result of that condo fiasco, with builders and developers shelving planned projects as investors rush to the sidelines.

What’s more, a current economic outlook marked by uncertainty over the impact of US tariffs is giving plenty of would-be buyers and builders cold feet about getting involved in the condo space.

Toronto will have ‘tremendous need’ for housing supply in coming years

Ab Iorwerth told Canadian Mortgage Professional pent-up demand was likely building in the Toronto market even despite the present gloom.

“The dilemma is that we need this long-term structural increase in housing supply and so as the economy recovers, as this macroeconomic uncertainty goes away and at some point if immigration starts again, we’re going to have a tremendous need for more housing and increased housing supply,” he said. 

“Condos are a part of it, but also in the secondary rental market. That’s the long-term scenario – the challenge is what’s going to happen in the short term.”

That means while a glut of further inventory is set to arrive in the months ahead, the exodus of builders from Toronto signals construction isn’t likely to hit the heights it needs to significantly improve the long-term outlook for the city’s housing market.

Starts of new apartment buildings are already slipping, ab Iorwerth pointed out, with presales down and less money flowing into the sector. “What I’m anticipating is a short-term oversupply in condos, particularly in Toronto,” he said. “But then the long-term supply is going to turn down as well. And in a few years, maybe prices will start to go up again. So this is the dilemma.”

When will Toronto’s condo market hit its floor?

Since 2022, when investors were still rushing to enter Toronto’s condo market thanks to rock-bottom interest rates and huge demand for rental properties in the city, purchase activity in the market has nosedived.

Condo sales are down by about 75% since then, according to CMHC, while last month saw a 24% drop-off in purchase activity compared with the same time last year.

The average resale price for a Toronto condo ($702,389) has fallen by 7% year over year, and about 13.4% over the past three years.

For now, hopeful homebuyers and renters in Toronto are welcoming a fall in shelter costs in the city, having seen home prices and rents skyrocket throughout most of the past decade.

But while plenty of potential buyers are still sitting on the sidelines as they wait to see how long the correction has to run, ab Iorwerth suggested the market will pick up pace when it becomes clear that the bottom is near.

“What I’m sensing anecdotally is that people will start to anticipate that the long-term demand is there and there may be some bottom fishing to get these units,” he said. “But it’s very difficult to call a time on.”

CMP

We hope you are finding our Blog informative and enjoyable to read while keeping you up to date with the ever changing real estate market. 

Please feel free to contact me via Direct/Text or e-mail at any time and my team will be pleased to assist you, family members and friends with all your real estate needs. Referrals are always welcome and rewarded!

Canada's housing market heats up in May

Canada’s housing market gathered pace in May, with national home sales recording their first monthly increase since late last year—a shift attributed to improving economic sentiment following diplomatic progress with the United States.

The Canadian Real Estate Association (CREA) reported Monday that seasonally adjusted home sales rose by 3.6% from April to May, marking the first monthly gain since November. The uptick in transactions came alongside a 3.1% increase in new listings, suggesting that both buyers and sellers are stepping off the sidelines as tensions ease.

Despite the boost in activity, the benchmark price for a typical Canadian home edged down by 0.2%, settling at $690,900, continuing a modest softening in values even as confidence begins to return.

The shift in momentum comes in the wake of renewed diplomatic efforts between Ottawa and Washington. A recent meeting between Prime Minister Mark Carney and US president Donald Trump appears to have calmed market jitters sparked by earlier trade hostilities.

“May 2025 not only saw home sales move higher at the national level for the first time in more than six months, but prices at the national level also stopped falling,” said Shaun Cathcart, CREA’s senior economist. “It’s only one month of data, and one car doesn’t make a parade, but there is a sense that maybe the expected turnaround in housing activity this year was just delayed for a few months by the initial tariff chaos and uncertainty.”

Year-over-year numbers still down

While the month-over-month data offers a glimmer of optimism, a broader view reveals that the housing market is still recovering from earlier volatility. Compared to May 2024, sales were down by 4.3%, and the total number of homes listed on the market was 13.2% higher, reflecting a gradual buildup of inventory.

That combination of rising listings and subdued prices may offer a window of opportunity for buyers who were previously hesitant due to macroeconomic uncertainty.

The May results could indicate the beginning of a cautious rebound, but experts urge patience. The overall market remains in a holding pattern, with both buyers and sellers adjusting to evolving economic signals.

CREA’s data shows that while housing demand is beginning to stabilize, the market is not yet in full recovery mode. Analysts are watching closely to see whether June and July will confirm a more sustained trend—or if May proves to be an anomaly.

As Cathcart cautioned, “one car doesn’t make a parade,” but for a housing market that’s been stuck in reverse, even one sign of forward motion is enough to turn heads.

CMP

We hope you are finding our Blog informative and enjoyable to read while keeping you up to date with the ever changing real estate market. 

Please feel free to contact me via Direct/Text or e-mail at any time and my team will be pleased to assist you, family members and friends with all your real estate needs. Referrals are always welcome and rewarded!

Inflation outlook gives BoC 'green light' to cut further, says Devlin Capital founder

Canadian bonds are becoming increasingly appealing to investors as economic growth slows and inflation returns to target levels, according to Ed Devlin, founder and chief executive of Devlin Capital.

“I think the Bank of Canada has done a pretty good job of cutting about 200 basis points already in this cycle,” Devlin said in a recent interview with the Financial Post. “And it looks to us like the inflation picture would give them the green light to continue to cut in the going forward. And we think they will.”

Devlin said the divergence between the Bank of Canada and the US Federal Reserve is largely due to differing inflationary pressures and fiscal strategies. “With regards to the Fed, they've got a bit more of an inflation issue around the tariffs,” he said. “Tariffs are really bad for growth in Canada. Tariffs are bad for inflation in the US.”

He added: “The Fed has taken a much more cautious stand. If you look at the Fed relative to really the other G7 countries, they're the ones lagging behind, which makes a lot of sense for like two reasons. One is that their inflation picture is a little bit more uncertain. And the other thing there is, they've been running much larger deficits as a percent of GDP in the US.”

Devlin also highlighted the potential for an economic downturn. “We think in Canada it's more likely than not in the next 12 months that we're in a recession. Hence, why we think the Bank of Canada should try to get to the policy rate down. It's at 2.75 right now. Get it down to one and a half to 2% within a year or so.”

He noted that the US may face a delayed recession, due in part to fiscal stimulus. “Again, just given their fiscal spending, they're probably a recession with a lag. Now, is that lag a year or two years? I'm not really sure.”

Regarding currency movements, Devlin said: “There's been a lot of hype about the bear market in the US dollar. And there's no way it's losing its reserve currency. There is no other currency out there that can substitute for it. But at the margin, investors, foreign investors are looking at a much more unstable environment, and they're looking to repatriate their funds.”

On oil prices, he remarked, “Oil is just a function of the global economy. You think oil is more of a proxy for global growth.”

Devlin warned that high global debt levels, combined with rising interest rates, present structural risks. “We had a debt crisis that we solved with a debt crisis, with more debt,” he said. “Now the central banks have stepped away and interest rates are going up and we've got the highest stock of debt in my lifetime, in most countries.”

He said interest rates will eventually have to come down, with high interest rates likely to “grind the economy down” through monetary policy.

“At the same time, we need interest to be lowered in order to have some kind of sustainability in our interest payments in the G7.”

CMP

We hope you are finding our Blog informative and enjoyable to read while keeping you up to date with the ever changing real estate market. 

Please feel free to contact me via Direct/Text or e-mail at any time and my team will be pleased to assist you, family members and friends with all your real estate needs. Referrals are always welcome and rewarded!

Toronto's condo market nightmare could be spreading to Vancouver

There’s no end in sight to the deep crisis facing the Greater Toronto Area’s condo market – and the outlook has also darkened for condo investors in Vancouver, with a glut of inventory sitting on the market and demand plunging for a property type that was once highly coveted in the city.

Condo sales have fallen through the floor in Toronto over the past three years, nosediving by 75% between 2022’s first quarter and the opening three months of this year. But Vancouver has also seen a steep falloff, Canada Mortgage and Housing Corporation (CMHC) highlighted on Tuesday, as sales activity in its own condo sector plummeted 37% during the same spell.

That’s sparked concerns that the quagmire facing Toronto – with a flood of new supply scheduled to arrive as pre-construction condos complete even while demand craters and investors flee the market – could be about to spread to other Canadian cities.

The core problem in Vancouver seems a similar one to Toronto: tiny units owned or ordered by investors whose purchase no longer makes sense because higher interest rates have turned the property cashflow-negative, lower demand has put downward pressure on rental prices, or sliding property prices have presented an appraisal nightmare upon completion.

“There are a lot of condos that were sold [in Vancouver’s downtown district] in the last three years which are coming up for completion now and most of them were investors,” Justin Prasad (pictured below), a financial advisor at BlueShore Financial (a division of Beem Credit Union), told Canadian Mortgage Professional. “And those are sitting empty. People can’t complete on it, or the price is down dramatically.”

In Toronto, those unit types often take the form of so-called “dog crate” condos, apartments of around 500 square feet (or smaller) gobbled up by investors during the 2010s and early 2020s as rents, property values, and rental demand soared in the city centre and its outskirts.

Prasad said the trend has been mirrored in Vancouver. “What you see is a lot of these kinds of micro-units: one bedroom, one bath,” he said. “I think there was this huge demand for it and they overbuilt on it.

“And now obviously with immigration [falling], students leaving, crackdowns on Airbnbs – there’s been a multitude of factors that I think have contributed to the decline in the condo market, and I don’t think it’s going to change in the next year, year and a half, or two years, right until demand and supply meet and you get equilibrium.”

CMHC says condo crisis could worsen housing outlook

Higher supply is already pulling rental costs lower in both Toronto and Vancouver, offering welcome relief for people in those cities who’ve seen housing and rental affordability slide alarmingly over the last decade.

But CMHC has also flagged the danger posed to the housing market outlook by the condo slowdown in Canada’s two priciest cities, noting that builders and developers have stepped back from the scene in recent years amid that alarming cooling-off in activity.

“While the growing inventories are leading to lower sale prices and asking rents for buyers and renters in the most expensive centres in the country, these factors also put downward pressure on new condo supply,” the national housing agency said on Tuesday.

“Between 2022 and 2024, the number of cancelled units in Toronto and Vancouver increased five- and ten-fold, respectively. This presents a challenge for both the existing housing shortage and future supply growth.”

Buyers begin to abandon units as investor purchase turns sour

Plenty of buyers who purchased pre-con units in Toronto have been left scrambling to make up the difference between the agreed amount and a sometimes significantly lower appraised value upon completion.

That’s resulted in growing reports of buyers abandoning their deposits and walking away from the purchase, leaving developers in the lurch and, in many cases, facing the prospect of a protracted legal tussle.

In Vancouver, that trend is also emerging – and it could be a while before things get back to any normality where the condo market is concerned, Prasad said. “People walking away from these things is becoming an issue because the scenario that they had in their mind two or three years ago is vastly different than it is now,” he said.

“And I think that it just has to flush itself out until we hit a bit of an equilibrium, which I don’t think will be for another 12 months, 15 months. Until immigration levels and interest rates stabilize, I think nobody’s really rushing to get into the condo market.”

CMP

We hope you are finding our Blog informative and enjoyable to read while keeping you up to date with the ever changing real estate market. 

Please feel free to contact me via Direct/Text or e-mail at any time and my team will be pleased to assist you, family members and friends with all your real estate needs. Referrals are always welcome and rewarded!

National housing market showed uneven recovery in May, says RBC

Royal Bank of Canada (RBC) assistant chief economist Robert Hogue saw Canada’s housing market displaying signs of readjustment in May as transaction levels rebounded in several major cities – even as price pressures and supply-demand imbalances persisted in others.

The banking giant’s recent analysis of May housing market trends suggested that some of the slowdown observed earlier in the year has eased, but the overall landscape remains mixed.

Resale activity picked up in markets such as Toronto, Calgary, Edmonton, Ottawa, Saskatoon, and Regina, where earlier declines were partially reversed. The change comes as economic concerns tied to the trade war have started to ease, although new tariffs on steel and aluminium continue to pose risks in some communities.

In Toronto, existing home sales increased by 8.4% between April and May on a seasonally adjusted basis. Inventory levels are elevated, offering buyers a wider range of options. The high volume of available homes has continued to weigh on prices, with the MLS Home Price Index (HPI) down 4.5% from a year earlier. While the HPI edged up slightly from April, the supply-demand gap points to the possibility of further price erosion.

Vancouver remained under pressure, with resale transactions declining for the sixth consecutive month. Inventory in the city reached its highest level in 12 years, driven in part by unsold new condominium units entering the market. With sellers competing for limited buyer interest, the region’s HPI dropped 2.9% year-over-year.

In Calgary, May brought an increase in resale transactions of more than 8%, following a series of monthly declines. Population growth and higher employment levels continue to support activity, though the MLS HPI fell 2.5% annually. A steady pace of new construction has helped increase housing supply and moderate price movements.

Montreal saw relatively stable conditions. Resale volumes slipped 2% from the previous month, but remained consistent with historical averages. Prices continued to trend upward. Single-family homes posted an annual increase of 8.6%, while condo prices rose 4.3%. A gradual rise in new listings is helping to ease earlier tight supply conditions.

Southern Ontario and parts of British Columbia, including Vancouver and Fraser Valley, continued to report weaker activity. Many of these markets are operating near cyclical lows, and pricing remains under pressure. By contrast, cities in the Prairies and Atlantic Canada, including Quebec City and St. John’s, have experienced more stable performance.

While some regional markets are adjusting more quickly, national housing trends remain sensitive to evolving economic factors and policy impacts. For mortgage professionals, the shifting conditions underscore the need to monitor inventory, pricing, and local demand patterns.

CMP

We hope you are finding our Blog informative and enjoyable to read while keeping you up to date with the ever changing real estate market. 

Please feel free to contact me via Direct/Text or e-mail at any time and my team will be pleased to assist you, family members and friends with all your real estate needs. Referrals are always welcome and rewarded!