The city's condo sector is in the midst of a sharp correction - but don't expect the bottom to fall out of the market anytime soon
A once-booming Toronto condo market has been plunged into crisis over the past year amid plummeting demand and cooling prices – a slowdown that’s also spreading to other cities including Vancouver.
A flood of new inventory is expected to hit the market in the summer and add to the number of empty units across the city, potentially putting further pressure on condo values and deepening the problems facing investors.
Through the 2010s and early 2020s, purchasing a pre-construction condo in Toronto was viewed as a safe bet because of high rental demand, particularly among international students, while soaring prices promised a lucrative profit when the apartment was sold down the line.
But that outlook has soured thanks to significantly lower immigration and rising interest rates, meaning mortgage costs on condos have jumped even as their values slid and demand tumbled.
The sharp pain in Toronto’s condo sector makes it one of the “pockets of concern” across Canada’s housing market, according to Canada Mortgage and Housing Corporation (CMHC) deputy chief economist Aled ab Iorwerth (pictured below) – but he’s stopping short of diagnosing a full-scale crash.
That’s partly because there are noticeably fewer cranes in the sky across Toronto as a result of that condo fiasco, with builders and developers shelving planned projects as investors rush to the sidelines.
What’s more, a current economic outlook marked by uncertainty over the impact of US tariffs is giving plenty of would-be buyers and builders cold feet about getting involved in the condo space.
Toronto will have ‘tremendous need’ for housing supply in coming years
Ab Iorwerth told Canadian Mortgage Professional pent-up demand was likely building in the Toronto market even despite the present gloom.
“The dilemma is that we need this long-term structural increase in housing supply and so as the economy recovers, as this macroeconomic uncertainty goes away and at some point if immigration starts again, we’re going to have a tremendous need for more housing and increased housing supply,” he said.
Canada's housing market saw its first monthly sales increase since November, rising 3.6% in May, reports CREA. This shift follows improving economic sentiment after diplomatic progress between Prime Minister Mark Carney and US President Donald Trump.https://t.co/DWf1gWqNB2
— Canadian Mortgage Professional Magazine (@CMPmagazine) June 16, 2025
“Condos are a part of it, but also in the secondary rental market. That’s the long-term scenario – the challenge is what’s going to happen in the short term.”
That means while a glut of further inventory is set to arrive in the months ahead, the exodus of builders from Toronto signals construction isn’t likely to hit the heights it needs to significantly improve the long-term outlook for the city’s housing market.
Starts of new apartment buildings are already slipping, ab Iorwerth pointed out, with presales down and less money flowing into the sector. “What I’m anticipating is a short-term oversupply in condos, particularly in Toronto,” he said. “But then the long-term supply is going to turn down as well. And in a few years, maybe prices will start to go up again. So this is the dilemma.”
When will Toronto’s condo market hit its floor?
Since 2022, when investors were still rushing to enter Toronto’s condo market thanks to rock-bottom interest rates and huge demand for rental properties in the city, purchase activity in the market has nosedived.
Condo sales are down by about 75% since then, according to CMHC, while last month saw a 24% drop-off in purchase activity compared with the same time last year.
The average resale price for a Toronto condo ($702,389) has fallen by 7% year over year, and about 13.4% over the past three years.
For now, hopeful homebuyers and renters in Toronto are welcoming a fall in shelter costs in the city, having seen home prices and rents skyrocket throughout most of the past decade.
But while plenty of potential buyers are still sitting on the sidelines as they wait to see how long the correction has to run, ab Iorwerth suggested the market will pick up pace when it becomes clear that the bottom is near.
“What I’m sensing anecdotally is that people will start to anticipate that the long-term demand is there and there may be some bottom fishing to get these units,” he said. “But it’s very difficult to call a time on.”
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