‘I think it’s going to take a while for this to sort itself out’
Last week, court filings showed that scores of buyers who purchased preconstruction condo units at Toronto’s One Bloor West tower are set to have their sale agreements nixed.
That ruling means over 300 buyers will receive their initial deposits back plus accrued interest as the long-running saga at the building – which was placed into receivership in 2023 and has faced a yearslong delay in completion of its condo project – rumbles on.
Some buyers reacted with dismay at news that their long-awaited purchase of a condo at the Toronto landmark wasn’t going ahead, although they’ve been offered the option to buy one again.
But many others who bought a unit in Toronto in recent years would jump at the chance to recoup losses and walk away from their sour investment, with the city’s condo market crash only getting worse.
Before interest rates started creeping upwards in 2022, a Toronto condo looked a surefire hit for investors: an opportunity to purchase a property, rent it out, and receive rental income while values continued their inexorable rise.
Some even decided to assign those properties, flipping them before they had to close and making a tidy profit from the rapid price increase even in a matter of years.
Then a rise in interest rates after Canada emerged from the COVID-19 pandemic coincided with a sharp downward revision in immigration targets, meaning rental demand for those property types dipped even as monthly mortgage payments fell.
RBC economist Rachel Battaglia says Canada’s new immigration rules may slow population growth, easing rental demand while reshaping housing and mortgage markets. https://t.co/1xQepWC8pp
— Canadian Mortgage Professional Magazine (@CMPmagazine) November 11, 2025
And while Toronto condo values seemed like they would never fall, they’ve been on a steady descent over the past two years – creating a crisis for many buyers who are suddenly unable to take out a mortgage to cover their original purchase price when closing time comes around.
That’s resulted in a nightmare for landlords and investors who are now bleeding cash on tiny units in the city – famously labelled “dog crate” condos – nobody wants to rent out or buy.
Some simply opted to walk away from their purchase, leaving their deposit on the table and opening themselves up to a potential mountain of legal challenges from builders and developers.
Is a surge in mortgage delinquencies ahead?
The crisis has left borrowers and brokers scrambling for solutions and sparked questions about whether it could cause a full-on meltdown in Toronto’s housing market.
That would likely become apparent in a big spike in mortgage delinquencies in the city – but for now, market watchers don’t see enormous cause for concern.
Year over year, overall mortgage delinquencies across the city have indeed surged, increasing by 60% between 2024’s second quarter and Q2 2025. That rise brings them to a level not seen since 2012.
But at 0.24% of all mortgages, those delinquencies are still relatively low – and Canada Mortgage and Housing Corporation (CMHC) believes there’s no immediate cause for panic.
“I’m still monitoring what’s going on, particularly in Toronto and Vancouver,” the national housing agency’s deputy chief economist Aled ab Iorwerth (pictured top) told Canadian Mortgage Professional. “Obviously, there are a lot of challenges at the moment.
“Delinquency rates for Toronto are now sort of matching the Canadian average, but over the last couple of years they’ve gone up. They used to be considerably lower. Even though the rate of increase has been high, I wouldn’t say it’s not an obvious worry at the moment – but it’s just something that we’re at least keeping an eye on.”
Condo demand will eventually return, says CMHC
Demand for condos in the rental and purchase markets isn’t expected to rebound anytime soon, particularly with plenty of storm clouds lingering over the economic outlook and immigration targets remaining lower than those seen in previous years.
Still, CMHC has recently highlighted that a plunge in Toronto housing starts is likely to continue in the years ahead, a trend that should eventually put more pressure on supply in the long run.
Canada’s housing construction sector took a sharper-than-expected downturn in October, with national housing starts dropping 17% from the previous month, according to new data from Canada Mortgage and Housing Corporation (CMHC).https://t.co/XhN4ZkafUD
— Canadian Mortgage Professional Magazine (@CMPmagazine) November 18, 2025
“I think it’s going to take a while for this to sort itself out,” ab Iorwerth said. “The flipside is on the supply side: housing starts for apartments, I think, are going to fall quite a lot. So going out three or four years, I have concerns that we’re going to be back in a shortage.”
Make sure to get all the latest news to your inbox on Canada’s mortgage and housing markets by signing up for our free daily newsletter here.
