Despite historical echoes, report highlights different market dynamics
Toronto’s condominium market is experiencing one of its sharpest slowdowns in decades, with stalled pre-construction sales, growing inventories, and investor pullback. Yet experts caution that today’s downturn is not a repeat of the 1990s collapse.
The Greater Toronto Area’s pre-construction condo sector has “entered a deep freeze with pre-construction sales plummeting to levels not seen since the global financial crisis,” RBC Economics reported.
Investor demand, once the main driver of new projects, has “largely evaporated.” Rising development and construction costs have pushed new units beyond the reach of many buyers, especially when existing condos are selling at lower prices. “Abundant inventory of existing condos—often available at prices below what developers can offer—has drastically altered the competitive landscape,” RBC noted.
Unsold units under construction reached a nine-year high, adding to the inventory of nearly 20,000 condo listings across the GTA. New condo sales, which exceeded 10,000 units per quarter during the pandemic boom, have fallen to below 2,500—a level not seen since 2009.
Comparing to the 1990s downturn
The Canada Mortgage and Housing Corporation (CMHC) stressed that while the market shares some similarities with the early 1990s, key differences point to a less severe correction.
Banks now require at least 70% of pre-construction units to be sold before financing is approved, compared with 50% in the late 1980s. By mid-2025, developers had sold 80% of units in buildings under construction and more than 90% in projects nearing completion.
Mortgage arrears remain low at 0.23% in the first quarter of 2025, compared with 0.68% at the height of the 1992 downturn. This reflects tighter lending standards, including mandatory stress tests to ensure buyers can withstand higher interest rates.
Supply shortage versus overbuilding
Unlike the 1990s, when overbuilding led to a prolonged slump, today’s market is underpinned by a housing shortage. CMHC noted that 9,363 units remained unsold in pre-construction, while 10,450 were unsold in projects under construction as of the second quarter of 2025. Yet demand pressure is evident in the rental market, with a record number of leases signed in the first half of 2025.
A slow road to recovery
RBC projects that inventories could begin declining in early 2026, setting the stage for a modest rebound in pre-construction activity in 2027. CMHC anticipates that slowing housing starts after 2026, combined with strong immigration, will eventually amplify supply concerns.
For now, Toronto’s condo market faces a prolonged adjustment period. Buyers retain negotiating power, while developers contend with high costs, subdued demand and the challenge of weathering an extended freeze.
