Are rule changes the key to bringing buyers back to the beleaguered market?
The continuing crisis in Toronto’s condo market is creating a sliver of opportunity for some homebuyers who were previously frozen out of a purchase because of sky-high asking prices.
The average price of a condo in the city centre tumbled by a further 4.3% in June compared with the same month last year, according to Toronto’s real estate board, with the wider 905 region seeing prices slide by 4.9%.
But that trend still isn’t generating a flood of new interest in a condo purchase among Toronto buyers – mainly because prices are still prohibitive for many.
Condo buyers in the city would have to shell out an average of $731,232 for a purchase last month, the Toronto Regional Real Estate Board’s (TRREB) latest figures showed, while those buying on the outskirts had to stump up about $630,156.
With homebuying activity plunging in the city’s condo space, plenty of would-be purchasers are still waiting in the wings in anticipation of further price drops.
Economic volatility and affordability issues persist in Canada’s housing market. CMHC reported 48% of Canadians used brokers last year, a trend Michelle Campbell, President of CMBA-ON, highlights as crucial for clients navigating turmoil. https://t.co/9gFCJNSFwg
— Canadian Mortgage Professional Magazine (@CMPmagazine) June 27, 2025
Are changes to the stress test on the way?
Recent speculation has suggested regulators could be contemplating changes to the stress test required to qualify for a mortgage – and that could hold the key to freeing up more buyers in Toronto.
Currently, the Office of the Superintendent of Financial Institutions (OSFI) requires borrowers to meet a minimum qualifying rate of 5.25% or two percentage points above the borrower’s contract rate, whichever is higher – but is reportedly considering tweaking that rule.
Instead, superintendent Peter Routledge suggested a “legitimate alternative or… complement” to the qualifying rate could be a rule to limit the share of new uninsured mortgages exceeding 4.5 times a borrower’s annual income.
After a trial run, a decision on whether to implement that measure in place of – or in addition to – the current arrangement is expected by January 2026.
The potential impact of that measure on the housing market remains to be seen. But revisiting the present structure, which has squeezed many buyers’ budgets amid rising rates in recent years, would be a positive step, according to Toronto-based mortgage broker Taz Zaide (pictured top).
He told Canadian Mortgage Professional that recent “whispers” about revamping the qualifying measures were welcome news.
“I think if there are any changes in the stress test, that will really help with a lot of clients looking to get into the condo market because I find that the ones that are selling condos maybe aren’t able to,” he said, “because the clients qualifying for them are not able to go higher.
“They’re under 30, single borrowers, no co-applicants, just relying on their income so they don’t want to stretch themselves too high. But without the stress test, I think that could allow them to hopefully qualify for a little bit more.”
A modified stress test could help borrowers qualify for more, Zaide suggested, and potentially spur renewed interest in condo demand.
Who’s currently buying condos in Toronto?
For now, Zaide said the majority of his clients purchasing condos are doing so with downpayments of less than 20%, especially those buying for the first-time.
Those are predominantly buyers who want the condo to live in, rather than investors, because the investment outlook on the condo front looks increasingly grim.
Prices are likely to hit a floor at some point in the months ahead – but the days where an investor could purchase a condo and sell it a short time down the line for a tidy profit are a distant memory.
“We’re seeing a lot of people downsizing, but it’s more so people on rent or [living] with parents going up into the condo market and doing a smaller-than-20% downpayment,” Zaide said.
“We have instances where they’re getting help from families to be able to meet the 20% downpayment, but it’s been mainly less than that. As we know with condos, that means the amount of equity they have in the home likely won’t grow for quite a bit because the condo market is pretty shot and we probably won’t see a rebound for a few years when prices start catching back up to where they were.”
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