After years of frenzy and growth, a new report by the Canada Mortgage and Housing Corp. points to a dramatic slowdown in Toronto and Vancouver’s condo markets.
Sales of new, resale, and pre-construction units have plunged since mid-2022, marking a stark shift from the boom period driven by low interest rates and investment.
By the first quarter of 2025, condo apartment sales had dropped by a staggering 75 per cent in Toronto and 37 per cent in Vancouver compared to mid-2022 levels, reads the report.
The sharp pullback comes amid rising borrowing costs and weakened demand from both end-users and investors, who now face higher mortgage payments and lower expected returns.
Soaring supply
Developers continued building even as the market turned. A record 25,572 units were completed in Toronto in 2024, along with 12,442 in Vancouver.
In Toronto, the months of inventory for pre-construction condos in Q1 of 2025 were more than 14 times higher than in 2022. It would take 58 months to sell the available stock at the current rate of sales, according to CMHC.
This oversupply is putting sustained pressure on prices. Between 2022 and Q1 2025, average resale condo prices fell 13.4 per cent in Toronto and 2.7 per cent in Vancouver.
Many investors who bought during the boom now face declining valuations and narrowing margins.
Investors under pressure
“High interest rates, which increase carrying costs, combined with stagnant price growth that limits equity building, have significantly reduced potential returns for investors,” said CMHC.
Based on prices of recently occupied new condo and similar units in the resale market, condo investors in Toronto potentially face up to 6 per cent in capital losses on pre-construction purchases concluded in 2024.
“It is also more difficult for them to access financing when the value of their condo units decreases between the pre-construction purchase and closing,” said CMHC.
New investors renting out their units are also negatively affected. Carrying costs in Toronto and Vancouver have grown 24% and 29%, respectively, while average rents have only increased by 15% and 12% since 2022.
Wave of cancellations and conversions
In Toronto, 55 per cent of pre-construction units remained unsold in Q1 2025. In response, project cancellations have surged, rising fivefold in Toronto and tenfold in Vancouver since 2022.
This level of unsold units presents a significant challenge for developers seeking funding for their projects. Lenders typically require a pre-sale threshold of 70% before releasing funds.
“The challenge in funding condo projects has led to some developers shifting to rental unit construction, where purpose-built rental unit construction programs offer potential financing,” said CMHC.
A temporary break for consumers
Growing condo inventories have led to a reduction in prices, and also lower rents as more owners compete for rental cashflows.
These shifts present relief for buyers and renters in the most expensive cities in the country. However, they do so at the cost of discouraging new construction and fueling underlying housing shortages in the future.
The condo projects cancelled today mean fewer housing completions in the future, notes CMHC.
“The relief for buyers and renters is temporary with future housing shortages compounded.”
Courtney Zwicker is a digital reporter and associate editor for REM. Based in Atlantic Canada, she has over a decade of experience covering daily business news.