Investors face a ‘perfect implosion’ as condo meltdown continues
There’s no sign of a late-year resurgence in Toronto’s floundering condo market, with sales and prices once again sliding in October as the months-long crisis rumbles on.
Condo sales across the Greater Toronto Area (GTA) slipped by 11% last month compared with the same time in 2024, according to the Toronto Regional Real Estate Board (TRREB), while prices tumbled by 4.7%.
That drop was spurred by a worsening slump outside Toronto city centre. In the wider 905 area, sales crashed by nearly 17% year over year and average prices were down 10.4%, falling to $574,111.
And for newbuild condos coming to market, the outlook is even darker. October data isn’t yet available – but the Building Industry and Land Development Association (BILD) said new condo sales in September were 90% lower than the 10-year average.
Those condos have become a toxic asset with investors no longer able to count on the same demand from renters and many owners bleeding cash because rental income has fallen while mortgage rates rose.
The result is a crisis in Toronto’s condo market on a scale not seen since the 1990s, even though – as the national housing agency has highlighted – important differences remain between the two downturns.
Further pain ahead for small-unit market
While falling prices and lower demand have created opportunity for some first-time buyers in that market, the size of many new condos remains a sticking point for plenty.
End users are showing an interest in larger units, according to DLC Clear Trust broker Micky Khaneka (pictured top), but demand is continuing to plummet for small condos built specifically to be owned by investors and rented out.
That’s presenting well-documented crises for buyers suddenly scrambling to make up the difference when an appraisal comes in lower than their agreed purchase price.
“It’s very product-oriented,” Khaneka told Canadian Mortgage Professional. “The smaller units, the 500- to 600- or maybe even 650-square-feet, are not that desired. And there’s a lot of even less than 500-square-feet units that were created and all came to the market at such a heavy pace that it got to a point where people weren’t able to close them.
“And now all of a sudden they have builders coming up with final closing dates, but they don’t have the money – it could be that there’s no blanket appraisal on it, or they don’t have the funds because now the appraised value is lower.”
The result is a “perfect implosion” for buyers who purchased those smaller, so-called “dog crate” condos, Khaneka said, particularly with renters now seeing more choice in the market – and an even bigger flood of new inventory set to become available in the months ahead.
“The bigger [condos] are still renting. So thankfully that market is still relatively strong,” he said. “Rents overall are still on a constant decline, but at least those ones are a better product fit than the smaller studios or the one-beds.”
When will the Toronto condo crisis hit its turning point?
Rental demand for smaller units isn’t expected to rebound anytime soon, with lower immigration levels set to continue in the years ahead and more purpose-built rental supply set to offer more competition next year.
Canada Mortgage and Housing Corporation (CMHC) sees a turning point before the end of the decade because new construction is likely to slow to a halt, eventually rebalancing supply and demand.
RBC economist Rachel Battaglia says Canada’s new immigration rules may slow population growth, easing rental demand while reshaping housing and mortgage markets. https://t.co/1xQepWC8pp
— Canadian Mortgage Professional Magazine (@CMPmagazine) November 11, 2025
But for now, more struggles could be ahead for investors. “I feel like there’s a long way to go because there’s just so many [smaller units],” Khaneka said. “The product is just not the most desired, most favourable for people who want to buy it as a rental.
“The rates, at this point, still don’t make sense when you add in the monthly mortgage payment or property tax and throw in the maintenance fees. It’s just not an attractive product, which makes it very tough to see a light on that front. I think we’re probably a few years out from there.”
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