It was once viewed as a lucrative investment, but the crisis gripping the city's condo market is showing no sign of fading
Chilly Toronto weather has stretched into April – and the frost over the city’s housing market is also lingering, with last month seeing the lowest number of March resales in the Greater Toronto Area (GTA) for 27 years.
Toronto’s beleaguered condo space is contributing heavily to that slump. In the downtown 416 area, sales slid by 21.6% last month compared with the same time last year, contributing to an overall plunge of 23.5%, while prices dipped by 2.6% as inventory continued to flood the market.
That trend, and a wave of condo buildings scheduled to come onstream by the summer, has stirred fears that another deep contraction is in the offing for a sector of the housing market once viewed as close to a surefire bet as investors could get.
It’s no secret why activity in the space is nosediving. A rapid spike in interest rates after the COVID-19 pandemic suddenly turned many investors’ pre-construction purchases into a cashflow-negative move, with appraisal issues erupting amid cooler demand, slipping condo values, and a growing trend of buyers walking away from their deposit and investment.
Scores of pre-con investors are now finding that lenders aren’t prepared to offer a mortgage for the price the buyer agreed to pay years ago, leaving the investor in the lurch when closing time finally comes around.
What’s more, the prospect of lower immigration numbers – particularly among cohorts that investors would typically rely on to rent out condos in Toronto, such as international students – means clamour for Toronto rentals looks set to continue fading in the months ahead.
Many investors who viewed a Toronto condo purchase for rental as a cash cow are now trapped in a nightmare as they grapple with a huge dilemma: pushing ahead with their purchase and having to find a way of stumping up the difference between the agreed price and the mortgage being offered by a lender, or simply abandoning the deal and leaving themselves open to possible legal action by developers.
As Canada aims to ease the housing affordability crisis, the construction sector warns of a labour crunch. Sue Wastell from Wastell Homes and Patrick McManus from Ontario Sewer and Watermain Construction Association emphasize the need for more workers.https://t.co/vvJigw8bH6
— Canadian Mortgage Professional Magazine (@CMPmagazine) April 8, 2025
Don’t expect a Toronto condo market meltdown despite current woes
Some investors who keep the property are finding solutions by lengthening amortization periods and keeping an eye on a refinance as rates fall, according to Toronto mortgage agent Kalson Jang.
But the number of investors lining up a condo purchase in the city has slowed to a trickle, he told Canadian Mortgage Professional, simply because it makes no sense from a cashflow perspective.
That’s not to say, though, that the crisis will become a meltdown. Jang said it’s a question of when, rather than if, demand eventually catches up with supply in Toronto.
“Part of the current problem is that too many condos were marketed and built during the huge surge in real estate in the 2010s,” he said. “By the time they were built and closed, rates were near a generational high.
“Lately, you’ve seen much fewer condo projects being marketed and built – so once we work through this excess inventory, there will come a time when much fewer projects are coming online and we’ll end up seeing the demand/supply conditions balance out again.”
Are opportunities emerging for first-time buyers in Toronto?
Whisper it, but the crisis might even be good news for a buyer type that’s been squeezed by investors in Toronto’s housing market during the past decade: first-time homebuyers.
Not only have home prices soared during the past decade – rents in Toronto have also shot through the roof, trapping many hopeful homebuyers in the rental market and making it increasingly difficult to put away the funds required to afford a downpayment.
The recent slowdown could present some opportunity for buyers who previously found themselves frozen out of the housing market, according to Jang. “The most active condo buyers [in Toronto] are definitely first-time buyers,” he said.
“Home prices have come down, but condos are still the primary starting point for most first-time homebuyers. For single-income buyers looking to buy their first home, it’s typically the only possible [purchase].”
That’s a sign that there are still green shoots on the horizon for Toronto’s condo market, he added, despite the recent gloom that’s clouded the space. “I’m still optimistic that this will be a good year for real estate,” he said. “Rates have been trending down for some time now.
“With fixed rates now entering the 3% range again, many buyers will see that as a sign to enter the market. Also, condo prices have come down so far that many buyers who couldn’t buy anything previously can now buy a pretty nice condo.”
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