Buyers hold off on entering a toxic market with prices likely to plunge further
How much deeper can Toronto’s condo crisis get? It’s a question housing market watchers have been pondering for the best part of a year and a half, with no sign yet that the sector is about to rebound.
Most of the signs suggest the fiasco still has a long way to run. Cuts to international student programs and curbed immigration have seen a sharp reduction in the number of new arrivals, typically a key renting demographic in Toronto, while investors have fled a market now widely viewed as radioactive.
What’s more, a flood of new supply – plenty of which is likely the tiny, so-called “dog crate” condos getting so much attention for the wrong reasons – is expected to hit the market in the coming months, potentially adding tens of thousands of units to a city already swelling with unwanted excess inventory.
No price rebound in sight amid historic slowdown
The Toronto Regional Real Estate Board (TRREB) said condo prices in the Greater Toronto Area (GTA) had nosedived to a four-year low by July, sliding by 9.3% compared with the same time last year – and by 21% from February 2022, when sales were still soaring.
And the fact that the market is still chilly despite lower prices suggests that buyers aren’t convinced a rebound is on the way, according to Joel Fox (pictured top), co-founder and chief operating officer at real estate closing platform Ownright.
He told Canadian Mortgage Professional plenty of condo units in Toronto still appeared to be overvalued because of the huge price appreciation seen in recent years, and especially during the ultra-low-rate environment of the COVID-19 pandemic.
“The hot question on everyone’s mind right now is ‘Why aren’t these selling when the prices drops are happening?’ But the price drops aren’t enough,” he said. “Even if we saw interest rates come more in line with what we expected them to get to this year, it still wouldn’t be enough.
“We were bound to hit this point where the prices were increasing so much and incomes just weren’t lining up with where the prices were. So I really think we’re going to see prices go down further and further until we hit that equilibrium where it starts to make sense for people to take the plunge.”
How far prices might have to fall for that to happen is anyone’s guess. In May, TD economist Rishi Sondhi said the outlook may brighten slightly for the condo market in 2026 if interest rates move lower and tariff-related uncertainty eases.
The national economy regressed in the second quarter as trade tensions with the US continued to pummel the growth outlook, leading markets to increase their expectations of a September interest rate cut by the Bank of Canada.https://t.co/XIaH6aQfqS
— Canadian Mortgage Professional Magazine (@CMPmagazine) August 29, 2025
But he described chances of a “heroic rebound” for the market as low – and the bank expects prices to continue slipping this year, although its forecast says they’ll still end 2025 between five and 10 points higher than their pre-pandemic level.
Buyers wary of getting trapped in a rapidly souring market
Fox said some of the nightmare stories emerging from the current condo crisis are also probably keeping buyers away and putting downward pressure on prices.
Plenty of preconstruction condo buyers have been stung by that fall in home prices, often meaning lenders aren’t willing to offer a mortgage at the agreed price and leaving buyers scrambling to make up the difference.
What’s more, the fact that condo prices aren’t stabilizing means that for many buyers, it makes little sense to leap into the market now instead of waiting it out for a better deal.
“Anyone who’s buying one of these condos now is reading everything in the paper saying that the condo market is horrible, and it’s dropping,” Fox said. “On one hand, that’s appealing because one might think that they can get a deal but then on the other hand, someone’s going to take a look at that and be like, ‘Am I jumping into an asset class that’s – I won’t say dying – but certainly on the downswing?’
“Any smart person jumping into the space at this point in time is going to have to consider that beyond maybe what seems like a good deal right now, it’s how much further these are going to drop.”
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