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Throughout October UrbanToronto is featuring a special State of Housing 2026 editorial series to examine the pressing housing challenges facing Toronto and the Greater Golden Horseshoe.
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For years, Toronto’s new condominium market ran on a simple assumption: buy before construction, wait, and watch the value rise. That assumption survived recessions, policy changes, and countless warnings about oversupply. It did not survive the aftermath of COVID.
The pandemic disrupted supply chains and drove up the cost of materials and labour. Inflation moved through construction budgets, and developers raised prices to keep projects viable. Investors watched those prices climb and mistook some of that cost inflation for value growth. If a suite cost more this year, surely it would be worth even more when the keys arrived four years later.
Soon, everyone wanted a share of the apparent upside. Landowners asked more for their sites. Trades raised their bids. Municipalities increased development charges and other fees. Every higher cost justified a higher sales price, which appeared to justify the next round of higher costs. Cheap debt kept the machinery running, while achievable rents and comparable resale prices became inconvenient details in the investment pitch.
Based on data pulled for a recent Bullpen Consulting client report, average asking prices for unsold new units rose from $956 per-square-foot (psf) in 2018 to $1,485 psf in 2022, a 55% increase. At the peak, some projects launched at premiums of 35% to 40% over comparable resale units, figures I discussed on the Toronto Under Construction podcast. Historically, that premium had been closer to 15%. Apparently, the resale market had forgotten that Toronto was a world-class city!
Then interest rates rose, and the arithmetic became harder to ignore. Investors faced higher carrying costs, weaker cash flow and resale values that no longer supported the prices they had agreed to pay.
In my view, the damage to the pre-construction sales model will ultimately be more consequential than the fallout from the condo market collapse of the late 1980s, and the data is bearing that out. Altus Group figures show new condominium sales falling from nearly 29,000 units in 2021 to just over 2,100 in 2025, a decline of about 93%. The fallout is visible in cancelled projects, distressed assignments, difficult closings, and developers renting completed units rather than selling them at today’s prices.
There is a second consequence that takes longer to see than the immediate sales collapse. The old model relied on thousands of investors making deposits years before occupancy. Those sales demonstrated demand and helped developers secure construction financing. Take the investors away, and an approved site can have a compelling design, a desirable location, and a genuine need for housing, yet still have no workable path to construction. The condo as a commodity delivers housing. The housing delivered is small housing, but that is better than no housing at all.
The condominiums that can still sell
The current state of the market is depressing, no condominiums are launching, and the ones that are, we’ll never live in. The rare condominium launch today looks different from the investor-oriented tower that defined the previous cycle. Boutique, ultra-luxury projects in exceptional locations can attract buyers seeking the best apartment money can buy. These purchasers care about architecture, finishes, privacy, service and address. Housing is a status symbol, and a current resale comparable or future price forecast are not the deciding factors in their purchase decision.
The luxury projects represent a very tiny slice of demand, but they will not replace tens of thousands of annual sales. On Episode 107 of Toronto Under Construction, Quinn Samardzic of Mattamy Homes has the few interested purchasers today are paying closer attention to how a home works: where they will eat, work, store their belongings and raise a family. Carlo Timpano of Capital Developments saw an opportunity just below the luxury tier, with generous layouts and strong design in established neighbourhoods.
Developers are trying to thread this delicate needle. The difficulty is delivering housing at a price buyers will accept. Larger, more functional suites cost more in total, while recently completed resale units offer something a new launch cannot: purchasers can see the home and often take possession in as little as 30 days. Asking someone to put down 20% for a condominium they see on a paper floorplan today, and MAY occupy four years from now is a much tougher proposition when they can walk through a completed alternative this month.
Everyone says they want larger, more livable condominium apartments. I do too. But if enough purchasers will not commit to them before construction, it does not matter how attractive the floorplans are. Those homes will never be built.
Rental changes the financing, the building and the customer
The lack of pre-construction condo buyers, the drying up of financing firms willing to back them, and more difficult construction financing terms has shifted developers’ attention to rental.
For some stalled condominium sites, purpose-built rental is the alternative. The shift is already evident in construction starts. Rental accounted for 26% of Toronto CMA apartment starts in 2023 and approximately 61% from January to July 2026, according to CMHC figures. Condominium apartment starts fell from 27,842 units in 2023 to 9,885 in 2025.
A rental conversion, however, is more than a simple change; there is a clear naivety about how easy it is for a developer to switch tenures. On Episode 107 of the Toronto Under Construction podcast, Timpano explained why the switch is far more demanding. Without purchaser deposits, a rental developer needs substantially more equity upfront, different construction and long-term financing, and the capacity to own and operate the building after it opens. The company must also know how to lease suites, manage residents and maintain an asset for years.
Those requirements narrow the field of developers who can proceed. They also change what gets designed. A proposed condominium tower may become a shorter rental building if that is the scale its financing and projected rents can support. Because the owner keeps the building, decisions about layouts, durability, amenities and operating costs carry weight long after opening day.
On Episode 109, CentreCourt’s Myles Millard described designing rental homes for livability and long-term value, rather than relying on what looks appealing on a two-dimensional pre-construction floorplan. Park Property’s Christopher Janisse discussed testing layouts and efficiency throughout the building. Rental does not automatically produce larger or better suites, but long-term ownership gives developers a strong reason to think about how those homes will actually function.
The financial pressure does not disappear when a project becomes rental. New Class A apartments are often offered at rents 10% to 15% above comparable investor-owned condominiums once separate parking and locker fees are included. Tenants may receive security of tenure, professional on-site management, better programming and a more consistent building experience. They also need to be able to afford the premium.
That matters to institutional investors seeking dependable income. Tenant protections are essential, but slow or uncertain remedies for persistent non-payment add operating risk. When policymakers strengthen protections without making the system work promptly and fairly for everyone, capital may gravitate toward higher-income residents and more expensive buildings. Protecting responsible renters and addressing bad-faith behaviour should be compatible goals. In practice, the friction between them can influence which projects attract capital and move forward.
Another response to the current condo downturn is the mixed-use project combining market rental and affordable housing, often with public land (or the waiving of taxes and fees), and government incentives. This is a positive outcome of the market reset. It creates homes that would not emerge from a conventional private development pro forma. But celebrating a few dozen affordable suites in each project should not obscure the scale of the need. These units are welcome; they are also a drop in the bucket.
Today’s surplus is tomorrow’s missing building
The luxury condos, higher-end rental apartment, and government-assisted mixed-income buildings being launched and started today are not nearly enough to satisfy household demand in the future. We cannot be fooled by most of the cranes in the sky today, as the majority represent the past market boom, not today’s realities.
The recent wave of apartment completions can create a misleading picture of abundance. It must be repeated, these buildings were largely sold and started when conditions were much stronger. They tell us what the market decided several years ago. The collapse in launches and starts tells us far more about what will be available several years from now.
The 2026 market, which will likely continue into 2027, is a strange concoction: a COVID-era price hangover, a sharp adjustment after the immigration boom, and uncertainty created by an unpredictable government south of the border. The White House seems equally willing to pick fights with its friends and its enemies, which hardly makes long-term Canadian investment decisions easier.
Despite those bearish sentiments, Toronto and Vancouver remain among the most desirable places to live in Canada, and people need a roof over their heads. Nobody moves to Vancouver for the affordability, so Toronto remains the centre of the Canadian universe, like it or not. Despite what you might hear on social media and via the clickbait news article, housing demand is still strong, but it is shifting in often unpredictable ways. Population growth may stay well below its recent peak, and demand may be lower than it was before COVID. Even so, if starts remain depressed, future completions will certainly fall far short of the homes needed to satisfy long-term household formation. The market will work through today’s excess inventory and there will be a future shortage, you can bet on it.
Prices and rents will eventually respond to that shortage. I would not mistake that for the return of the old pre-construction investment cycle. Many investors have been burned, the perception of easy money is gone, and high-rise construction remains expensive to build. NBLC’s Josh MacLeod suggested in Episode 107 that investors who return will be more selective about location and fundamentals. Selective investors may support some excellent projects, but we won’t see many 60- to 70-storey towers, meaning less units get built.
The next cycle will therefore produce a different skyline: smaller towers, many of them rental; more missing-middle housing; a limited number of exceptional luxury condominiums; and affordable housing partnerships that deserve support but cannot carry the supply burden alone.
The cruel irony is that Toronto can have too many completed condos for sale today and too few homes under construction for the people who will need them later. COVID helped inflate the costs and expectations that broke the old model. What replaces it may be better designed for the people who live in these buildings, but much fewer people will benefit from those changes. Unless we find a way to produce substantially more of them, it will also leave us with a much less affordable market than the one we had before the pandemic.
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Throughout October, UrbanToronto will be publishing features that examine the housing crisis in depth. Follow along as we present stories and perspectives that capture the state of housing today, and the ideas shaping how the region meets its growing need for homes.
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UrbanToronto's research and data service, UTPro, provides comprehensive data on construction projects in the Greater Golden Horseshoe—from proposal through to completion. Other services include Instant Reports, downloadable snapshots based on location, and a daily subscription newsletter, New Development Insider, that tracks projects from initial application.
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Thank you to the companies joining UrbanToronto to celebrate State of Housing Month.
