Don't expect the condo market to stage a comeback at current prices, say analysts
Prices are falling in Canada's once-hottest condo markets, but Canadian Imperial Bank of Commerce (CIBC) deputy chief economist Benjamin Tal and Urbanation's Shaun Hildebrand suggested they'll have to slide even further before a recovery takes hold.
In a new analysis joinly released by the companies, Tal and Hildebrand said data suggests prices need to fall another 5-7% and rates must drop further for buyers to turn back towards the market. As supply slows and completions hit multi-decade lows by 2028, rents are expected to rise again, supporting a return to buy-and-hold strategies. The condo market is also expected to shift toward smaller, more livable projects, moving away from the speculative buying that dominated after the pandemic.
Canada’s housing market in 2025 was shaped by regional differences and a shifting condo sector, creating new challenges for lenders and investors. The analysis showed that, even with national housing starts near 300,000, the real trends were happening locally.
Atlantic Canada experienced record housing starts in recent months. Quebec and Alberta both saw strong activity, each with around 60,000 starts—well above their usual levels. Meanwhile, Ontario averaged just 63,000 starts in the first seven months of the year, down 23% from last year. BC’s market stayed weak, with high inventory and a downward trend continuing into 2025.
Toronto and Vancouver resale markets stayed firmly in buyers’ territory, while purpose-built rentals gained momentum due to lower land costs, government incentives, and institutional interest.
Purpose-built rental construction is rising, partly due to talk of reviving the Multi Unit Residential Building (MURB) tax program. The original MURB, which ran from 1974 to 1981, helped add about 200,000 rental units.
"The new MURB will not be the silver bullet we are all looking for to solve our housing affordability issue," CIBC warned, pointing to today’s higher construction costs and more complex policies. Still, a modernized MURB could “add to the stock of rental units” if designed for current market realities.
The condo sector, especially in the GTA, has been hit hard. New sales are at their lowest in decades and prices have dropped 19% since early 2022. Yet, “the condo market is simply too important for the housing market to stay down,” the report said.
Improved affordability, lower rates, and new 30-year insured mortgages have boosted transactions for condos under $500,000 by 47% in early 2025. New figures from Toronto Regional Real Estate Board (TRREB) showed average condo prices in the 905 region dropped 10.6%. Condo sales also declined, falling 3.4% in Toronto’s core and 7.7% in the suburbs year over year. Overall, condo sales so far this year are down 16.6% compared to the same period in 2024.
Terry Dowle, president of the Appraisal Institute of Canada, told Canadian Mortgage Professional that these uneven market conditions are making it harder for appraisers to accurately assess property values.
“The condo market is an extremely challenging space to be doing valuations,” he said. “Using a sale from a year ago is of absolutely no use in the condo market because the values could be 20% different in certain market segments.
“So you really need a current supply. Barring that, appraisers can look at listings to determine the general market trends, but the listings are all over the place now. It’s a really difficult market space.”
