If housing market watchers needed any further proof that 2025 was a wretched year for Toronto’s condo sector, a report last week showed that new condo sales in the Greater Toronto Area (GTA) and Hamilton plummeted to a 34-year low.
Just 1,599 new condos were sold across the region in 2025, according to Urbanation, a stunning 95% drop from their 2021 peak.
Mortgage professionals are already well aware of the crisis that’s besieged Toronto’s once-thriving condo market: floods of investors who bought a preconstruction condo in recent years are now confronted with the prospect of big losses on the purchase thanks to higher interest rates, plunging rents, and much lower rental demand for smaller condos.
With prices also sinking, plenty of buyers are also facing an appraisal crisis, suddenly unable to secure a mortgage for the price they originally agreed to pay for the condo.
And while falling prices and cooling demand have opened the door for some prospective buyers who were previously frozen out of the city’s housing market, observers including the national housing agency have warned that affordability will likely take a further hit in the years ahead because of the slowdown.
That’s because builders and developers are flocking to the sidelines amid the deepening catastrophe. Urbanation said 28 active projects and a total of 7,243 units were axed last year – more than double the number of cancelled units from a year prior.
The real estate agency’s president Shaun Hildebrand said that trend marked “significant cause for concern” for future inventory in a region where Canada Mortgage and Housing Corporation (CMHC) already sees an acute supply shortfall.
Mortgage brokers, too, view the ongoing crisis as bad news for Toronto’s housing inventory down the line. “The valuations are only coming in lower – not higher,” Taz Zaide (pictured below) of 6ix Mortgage Group told Canadian Mortgage Professional. “It’s quite evident now that it’s not rates that are driving the market anymore.
“Obviously, there are other outlying factors, so we’ll definitely see a lot of that still happening on the appraisal side. And if they do stop building, I don’t think it’ll really solve affordability – it’s just going to create the next supply problem.”
Moderating rents cause more headaches for investor buyers
Investors and landlords aren’t likely to see a sharp rebound in rental costs in the city anytime soon, either.
Rent for the average one-bed apartment in Toronto was 6.5% lower in December than the same time the previous year, according to Rentals.ca, while the average two-bedroom rent tumbled by 9.1% over the same period.
That’s good news for hopeful first-time buyers currently renting whose purchasing power has been squeezed over the past decade by soaring rents in the city – and while rental demand in the 416 city centre hasn’t exactly fallen off a cliff, Zaide said it remains “pretty dead” outside that core.
“I think it really depends on what areas you’re looking in,” he said. “If it’s in Toronto, there’s still demand for rent – there are a lot of units that are still up for lease and they go quite quickly.
“But aside from that, outside of the Toronto-centric area, I do find that it’s a bit harder to get the rent, especially to cover some of your borrowing expenses on the property. So people are taking a bit of a hit on that end as well.”
Some buyers opt to abandon units, accepting legal risk
The situation has gotten so dire that for many buyers, the best-case scenario is closing on their purchase and – with no prospect of getting that money back through a quick resale – taking a monthly loss while hoping that demand will eventually rebound.
Others don’t see that as an option and are simply walking away from the deal, leaving tens of thousands of dollars (and potentially more) on the table and accepting the possibility of legal action by the developer.
For those individuals, even being able to secure a mortgage through a private solution often isn’t an appealing outcome, Zaide said.
“[Some clients] would have to go into a private mortgage,” he explained. “While yes, there are options to close your property with other lenders, if you don’t qualify by traditional means – let’s say with an A or B lender – it’s private.
“But then with private, your expenses and carrying costs are so high. You’re talking rates above 7%. So it just doesn’t make sense monthly. You have to look at it realistically if it’s worth it or not, and how much you’re going to be bleeding out every month. And on top of that you’ve got fees as well. It all kind of adds up.”
CMP
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