Condos under construction at Sherbourne Street in Toronto in 2024. Preconstruction condo sales in the city are at their lowest level since the 1990s.Abhijit Alka Anil/The Globe and Mail
Preconstruction condo prices in the Toronto region need to drop by another 5 to 7 per cent to attract retail investors again, a new industry report estimates.
Individual investors, who used to account for at least 70 per cent of preconstruction condo sales in the Toronto area, have disappeared because condo investments are no longer profitable.
They can find much better value on the resale market, including among condos that were recently completed.
Those new condos on the resale market are an average of 18 per cent cheaper than unbuilt preconstruction condos as of the second quarter of this year, according to a report Thursday by condo research company Urbanation Inc. and Canadian Imperial Bank of Commerce.
Although the gap between the newly built condos and preconstruction units has shrunk from 40 per cent in early 2023, the report says preconstruction prices need to fall an additional 5 to 7 per cent to help “restart the condo engine.”
That would bring the average price per square foot closer to $1,000.
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As of the second quarter of this year, the average preconstruction condo sale price in the Toronto region was $1,148 per square foot. In comparison, those that were recently completed and listed on the resale market averaged $974 per square foot, according to Urbanation data.
During the pandemic’s real estate boom, condo projects would attract so much interest that there would be lines of buyers waiting outside sales centres. It was common for developers to sell out over a few weekends.
This year, preconstruction condo sales in Toronto are at their lowest level since the 1990s.
With mortgage rates still relatively higher than during the early days of the pandemic, investors are not able to cover their monthly expenses with rent. They are bleeding cash every month, which is also known as being “cash-flow negative.”
The Urbanation and CIBC report said that rent in the Toronto region would have to increase by an “unrealistic” 55 per cent over the next few years for today’s preconstruction condo buyer to cover their mortgage payments and other expenses with the rent.
“The numbers simply don’t make sense when prices are falling and investors are experiencing steep negative cash flow,” the report said.
Over the past few years, the situation has been particularly grim for many mom and pop investors who have been in the process of closing on their purchases. Some have defaulted because they cannot get a mortgage as their condo is worth less than what they agreed to pay in past years.
Those who are able to close are burning through cash every month. Urbanation estimates that condos that were completed and closed in the first half of 2025 were sold for an average of $1,166 per square foot.
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The mortgage payments, condo fees and other expenses amount to an average monthly cost of about $6 per square foot, according to Urbanation president Shaun Hildebrand. Meanwhile, the going rate for a rental in a newly completed condo is averaging $3.75 per square foot.
Mr. Hildebrand said rents would have to be 60 per cent higher for those investors to break even on their properties.
That is unlikely to happen. Rental rates have been dropping in the Toronto region with a record number of new condo units flooding the market.
The significant slowdown in sales and rise in purchase defaults has imperiled the real estate development industry, which has been calling on government to cut development charges and change other policies to help spur activity.
The federal government has proposed legislation that would waive the 5-per-cent federal goods and services tax for first-time preconstruction homebuyers as long as they plan to live in the property.