There are no easy answers for investors or brokers in the city's ongoing condo market slump
Toronto’s condo market woes are showing no sign of shifting. Activity and prices fell in both the city centre and wider GTA (Greater Toronto Area) last month as hopeful sellers face an even longer wait for the tide to turn – and the outlook is looking gloomier still for preconstruction buyers.
Scores of investors purchased condos in recent years before ground had been broken on the building, hoping to tap into what was then one of Canada’s most lucrative real estate opportunities.
But closing time on those condos is now looming into view at the worst possible moment for those buyers, with appraisals in many cases coming in well below the agreed sale price from years before.
That’s leaving no easy answers for investors faced with the conundrum of how to make up the difference between appraised value and agreed fee – and how to avoid bleeding money on a rental property that’s now potentially cashflow-negative.
Brokers taking ‘situation-based’ approach to client crises
Mortgage broker Micky Khaneka (pictured top) of DLC Clear Trust Mortgages told Canadian Mortgage Professional there’s no one-size-fits-all solution for investor clients at risk of being burned by the condo downturn.
“It’s situation-based,” he said. “But some of the common [solutions]: if clients are in a capacity where they have other properties, it’s leaning on their equity and maybe helping them refinance and pull some equity to cover the shortfall.”
Well-documented examples have seen clients simply leave their deposit and walk away from a preconstruction purchase – not an ideal outcome, Khaneka said, because that “worst-case” scenario still leaves open the strong possibility of being sued by builders.
Selling a GTA condo is "quite a challenge" says Taz Zaide, a mortgage agent with 6ix Mortgage Group. Thousands of condos sit unwanted as investors flee and demand dries up, forcing sellers to cut prices repeatedly.https://t.co/8mFsNKCucY
— Canadian Mortgage Professional Magazine (@CMPmagazine) June 26, 2025
In other cases, builders are willing to work with buyers, offering VTB (vendor take-back) mortgages in which the seller covers a percentage of the mortgage to be directly repaid later by the buyer.
Each of those is an imperfect option, with little upside once the deal is over the line. “Even for clients who are closing, they know that the value is not there – but now they have to close,” Khaneka said. “A lot of those were speculative buys because everything was going up at the time, and they thought, ‘We’ll just rent it out.’
“But the oversupply, especially in the condo market, has caused rents to start to come down. So payments are still high, rents are low. And then you throw in the property tax and maintenance – just as an investment, it doesn’t make sense.”
That means even when clients are finding a way to close, it’s simply a case of “biting the bullet,” according to Khaneka, and accepting that the investment could continue to lose money in the short term. “It’s just a tough pill to swallow,” he said.
Blanket appraisals an option for (some) borrowers
Some lenders have offered blanket appraisals honouring the value the condo was purchased at, meaning borrowers aren’t left scrambling to make up the difference between appraisal and original price.
That’s helped plenty of customers in a bind – but borrowers still have to qualify for that appraised value, no easy feat in a current market where rates are now a lot higher than when they originally purchased.
“They might have qualified, or run a quick calculation at the time,” Khaneka said, “but now keeping those new rates in mind, or their personal income situation or debt scenario changing, the bank specifically might not honour that approval or might not qualify them again – so they have to now resort to other options.”
Major banks including Royal Bank of Canada (RBC) have presented that solution to certain clients. That bank's product suite isn’t available to brokers – but Khaneka said he’s still advising clients to check with each of the major banks to see if they can provide a blanket appraisal and help them overcome financial struggles at closing.
“If appraisal is the sole reason that we’re not able to take it across the finish line, maybe checking back with the bank is a better idea,” he said, “just because it’s hard for people to fork out another $100,000, $150,000, $200,000 in some cases, from their personal savings or pockets. And it’s hard for people to have that type of money just lying around to close a property.”
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