A lot on Raglan Avenue near St. Clair Avenue West in Toronto, where a condominium development called Alfie has been planned since 2022.EDUARDO LIMA/The Globe and Mail
During a July episode of one of the GTA’s many condo investor podcasts, brokers Ralph Fox and Zhen Liang bantered about “a big problem no one’s talking about.” Many problems, actually: investors who’d gambled on flipping preconstruction units and were left holding an asset they couldn’t afford to close on; cramped downtown one-bedrooms that were sitting on the market for months with little prospect of moving; eye-watering losses; agents who’d gone AWOL.
In fact, the rapidly accelerating crash had become a topic of obsessive debate in the condo industry.
“You really feel for these people,” mused Mr. Fox, the show’s host. “You read the stats in the newspaper, and it’s, like, all these greedy investors. But these are generally mom and pop investors just trying to get ahead, and they ended up in these really bad predicaments.”
Condo sales in Toronto, Hamilton fall to 35-year low in third quarter
FOMO, they agreed, was also a factor back in 2021, when interest rates were almost nil, resale prices were skyrocketing and lineups for preconstruction units snaked around the block.
“What’s the catalyst for condo buyers to come back?” Mr. Liang asked. “That’s something I’m grappling with all the time.”
“It’ll take four or five years for resale to catch up, to make it plausible at current prices, for preconstruction to make sense,” Mr. Fox predicted, referring to an overhang of thousands of unsold condo units across the GTA and Hamilton. “Then [it will] probably take four or five years after that to catch up from the time sales start to rebound on the preconstruction side.”
A vacant lot at the corner of Broadview and Mortimer Avenues in Toronto, where a condo development called Angular had been planned.EDUARDO LIMA/The Globe and Mail
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The cratering of the Greater Toronto Area condo market is occurring in the midst of a housing crisis, and thus raises tough questions about how supply and demand came to be so out of sync. Preconstruction sales have fallen to a 30-year low, while a growing number of large-scale projects are being cancelled, according to a new report by Urbanation Inc., a real estate analytics firm. “New condominium apartment sales in the Greater Toronto Hamilton Area (GTHA) totalled 319 units in Q3-2025, the lowest quarterly total since Q3-1990. Sales were down 54 per cent from a year ago and fell 92 per cent below the latest 10-year average for Q3 periods.”
“We peaked in sales some time around 2021, 2022,” says Justin Sherwood, COO of the Building Industry and Land Development Association. “In ’23, we halved, 2024 halved that, and [in] 2025 – we’re nowhere.”
The development industry blames policy failures – high fees, slow municipal approvals – as well as other forces, such as labour shortages, supply chain interruptions and inflation in the cost of building materials. Mr. Sherwood also notes that other cities are seeing a downshifting in their respective condo sectors. “It may have started in GTA condos, but [the downturn] is everywhere. It’s in all major urban centres, across all product types.”
Indeed, the story of the bursting of the GTA condo bubble, and the ensuing ripple effect, shows what can happen when super cheap credit fuels rampant speculation, especially in the tiny and overpriced apartments that mainly served the needs of investors in a bull market.
Federal banking regulators didn’t seem to notice what was going on until relatively late in the bubble, only issuing their first warning about accumulating risk in the housing industry, due to growing defaults and flagging demand, in a 2023-2024 outlook. At that point, the Office of the Superintendent of Financial Institutions revealed it had begun monitoring “borrower vulnerabilities” and later released guidelines for lenders on “high risk mortgage products.”
The marketing phone number for Angular's developer, Daffodil Developments, takes callers to a voice mail box that no longer accepts messages.EDUARDO LIMA/The Globe and Mail
Mark Conway, president of N. Barry Lyons Consultants Ltd, a real estate economics firm, says the market downshifted rapidly due to a host of macroeconomic factors that occurred roughly at the same time: Ottawa clamped down on immigration, international student visas and foreign buyers of real estate and the Bank of Canada began hiking rates to contain inflation.
“Potential buyers are seeing all this happen in the market, and all of a sudden, there’s this uncertainty. And what do people do when they’re uncertain? They sit on the sidelines.”
Needless to add, U.S. President Donald Trump’s tariff-based attack on the Canadian economy, which began last spring, has merely amplified all that uncertainty.
Over the next several weeks, the Real Estate section will examine the causes and consequences of the market collapse in a city-region that used to brag that it had more construction cranes in the sky than any other major North American city, including New York.
Toronto has seen real estate crashes before – house prices in the mid-1970s and the capsizing of the office market in the early 1990s. But it’s never experienced a collapse in the condo sector, in large measure because the condo market has grown remarkably steadily over almost three decades.
Toronto preconstruction condo market downturn will reverse, housing agency says
The trend lines show occasional dips, but mainly it’s a narrative about growth driven by factors such as immigration-related population increases and land use reforms that encouraged intensification in hubs like King West, Yonge and Eglinton and Mississauga Town Centre.
Toronto in the 1960s and 1970s attracted a huge amount of capital investment in purpose-built rental apartment buildings, thanks in part to a federal tax incentive. But condos, which only became a legal form of title in the mid-1970s, gradually took over the residential development sector, effectively killing purpose-built rental apartments. “Things began to take off” in the 1990s, says David Amborski, a professor emeritus in Toronto Metropolitan University’s school of urban and regional planning. “If a developer had a site, the return on the condo was greater than [the] return on purpose-built rental.”
The business model worked like this: developers had to presell about 70 per cent of the proposed units in a project to qualify for construction loans. And unlike rental buildings, which require costly mortgages that take decades to pay off, they earned back their investment rapidly.
Initially, condo buyers were also the people who lived in the units. Gradually, buyers began to include investors looking to rent out these units – including as short-term rentals – and generate enough operating income to cover their borrowing costs.
Yet at some point in the past decade or so, the condo market, which seemed increasingly capable of defying gravity, began to attract speculators, and they came in two forms: those who would make a down-payment on a preconstruction unit and then flip it for a quick gain in what’s known as an assignment sale; and others who reckoned they could make money on their units in two ways: renting them out in a market with inflated lease rates, and then reselling them to generate a capital gain that could be used to buy more condos.
As long as resale prices were going up, the math worked.
“For the most part, it was investors buying units to hold and rent out for long-term capital appreciation, for use in retirement planning and potentially to pass on to children,” Urbanation president Shaun Hildebrand said in an e-mail.
“However, when interest rates dropped during COVID and prices began rising quickly, the condo market became dominated by speculative investors who were looking for quick short-term gains. The investment strategy shifted from buy-and-hold to buy-and-flip, with little regard for the actual prices being paid and the product being purchased. Many investors are now learning painful lessons about the risks involved in speculating on preconstruction condos.”
At the time of publication, the marketing phone number for Madison Homes, the Alfie condo project's developer, gave callers a 'not in service' recording.EDUARDO LIMA/The Globe and Mail
The surge of investment – speculative or otherwise – left a very specific mark on the city’s built-form and skyline. Architect Richard Witt, a BDP Quadrangle principal who has worked on numerous condo high-rises, cites some of the super-tall towers at the Vaughan Metropolitan Centre, which became a development node after the terminus subway station on the Toronto-York Spadina Subway Extension opened at Jane and Highway 7 in 2017.
The land use plans for that area envisioned a 30- to 40-storey limit and offices. Witt’s client, one of the early developers, built to that level. But, he adds, the later projects “got pushed up to 60 storeys because the speculator market said, `Give me more. Give me more. Give me more.’”
Many of the projects now being cancelled involved plans for clusters of ultra-tall towers packed with tiny apartments, many with windowless bedrooms. In the current market, developers can’t attract buyers willing to put a down-payment on a preconstruction apartment, which means they can’t reach the financial threshold required to commence construction. Some are rolling out increasingly heavy incentives: Lakeview’s Aqualuna Phase Two on the Toronto waterfront is offering mortgage-free purchases for 30 months.
Industry insiders say that when demand for preconstruction apartments shows signs of life a few years hence, after all the current unsold units are finally acquired, it’s unlikely that developers will be pitching massive projects. As Mr. Witt predicts, perhaps optimistically: “We’ll move to an end-user market where the cost of housing is aligned with incomes.”
Special to The Globe and Mail
Editor’s note: Captions accompanying photographs of the Alfie condo project have been updated to clarify that the project has been planned since 2022, and that the marketing phone number for Madison Homes, the project's developer, gave callers a 'not in service' recording at the time of publication; the number has since become operational.