Toronto’s Condo Bust: How a Decade of Investor-Driven Building Unwound

Toronto’s condo bust is the unwinding of an investor-financed construction machine, not a collapse in the city’s need for homes. For most of the 2010s, roughly 80% of pre-construction purchasers in hot Toronto launches were investors rather than end-users, and their deposits financed the towers that gave the city one of the largest high-rise pipelines in North America. That system required three things to hold: rising prices, rising rents and cheap mortgages at the point of closing. Between 2022 and 2026 all three reversed. The result is a market where the Greater Toronto and Hamilton Area (GTHA) had its first quarter without a single new condo launch in at least three decades, where developers are selling finished units in bulk to institutions at discounts, and where some of the city’s best-known builders have passed through creditor protection. This article explains how the model worked, why it failed, what the 2026 data show, and how Vancouver’s parallel downturn compares. It is part of the Canadian Company Stories hub.

How did the pre-construction model turn Toronto into a condo factory?

The pre-construction model let developers finance towers with buyers’ deposits rather than their own equity, which allowed Toronto to build more high-rise units than any other North American city for most of the 2010s. A purchaser signed an agreement of purchase and sale years before completion, paid deposits of roughly 20% in instalments, and the developer used those contracts to satisfy a construction lender’s presale threshold, typically 60% to 70% of units sold.

The investor was essential to the arithmetic. A buyer living in the unit cares about the floor plan and the neighbourhood; an investor cares about the spread between rent and carrying cost at closing, and about the capital gain between contract price and market value on registration. From 2010 to 2021 both worked. The Globe and Mail’s analysis of CMHC data found that 56.3% of Toronto condos built between 2016 and 2022 were investor-owned, and marketing executives in Vancouver put the investor share of presales in hot launches at around 80%.

That demand shaped the product. Because investors optimise for price per unit and rentability rather than livability, developers built ever-smaller suites: studios and one-bedrooms under 600 square feet made up a rising share of launches, and the condo became the city’s de facto rental supply. Purpose-built rental construction had largely stopped in Ontario after rent control was introduced in the 1970s, so the investor-owned condo filled the gap.

At the 2022 peak, Urbanation counted roughly 127,000 units in pre-construction and under construction across the GTHA, and 35,000 new units were planned for launch in that single year. The market was a two-sided machine: rising rents justified rising presale prices, and rising presale prices justified the next launch at a higher number. It depended on the Bank of Canada’s policy rate staying near zero.

What broke in 2022 and why did it take three years to show?

The Bank of Canada’s rate increases from 0.25% in early 2022 to 5% by mid-2023 broke the model, but the damage surfaced slowly because units bought in 2017–2021 only reached closing in 2023–2025. A pre-construction buyer does not need a mortgage until occupancy, so the shock arrived with a lag of three to five years.

The first symptom was at launch. In mid-2022 Urbanation reported developers delaying about 10,000 planned units, with presale sales down 18% quarter over quarter even as launches rose, and it warned that newly completing units would be cash-flow negative by about $700 a month on a typical 650-square-foot suite. By 2024 CIBC economist Benjamin Tal and Urbanation’s Shaun Hildebrand calculated that investors who closed in 2023 were losing an average of $597 a month, more than double the 2022 figure, as ownership costs rose 21% against rent growth of 8%. The Globe and Mail reported that just over 80% of new-condo investors in Toronto were cash-flow negative.

The second symptom was at closing. Units that had been priced at $1,200 to $1,400 per square foot in 2021 were appraised by lenders at resale values closer to $850 to $900, so the mortgage covered less than the buyer expected and the shortfall had to come from cash. Many buyers tried to assign contracts at a loss; others simply failed to close, forfeiting deposits and forcing developers to resell completed units into a market with no bid.

The third symptom was at the construction lender. With presales stalling, projects that had not yet broken ground could not reach their financing thresholds. Cancellations across the GTHA reached 11,653 units between the start of 2024 and June 2026, including 1,022 in the second quarter of 2026 alone. By the first quarter of 2026 the GTHA recorded zero new project launches, the first such quarter in at least three decades, and the second quarter repeated it.

What do the 2026 numbers say about the bottom?

The 2026 data show a market that has stopped falling in volume but is still adjusting in price, with standing inventory at record levels. Urbanation’s Q1 2026 survey counted 246 new condo sales in the GTHA, 52% below a year earlier and the lowest since the early 1990s, with 4,295 completed-but-unsold units, more than double the prior year, and a theoretical 92 months of supply at the quarterly sales pace.

The second quarter improved on the surface. New condo sales rose to 702, up 52% year over year and the first annual gain since the third quarter of 2023, but 535 of those were completed units and only 50 were pre-construction sales, down 80%. Much of the uplift was bulk buying by institutions and the Ontario HST rebate, which took effect on 1 April 2026. Completed developer-held inventory nevertheless rose further to a record 5,001 units, up 68% year on year. Combined new and resale inventory stood at 12,106 units, and months of supply fell to 7.3 from a peak of 8.5.

Price convergence is the mechanism that clears the backlog. Developer asking prices on completed inventory averaged $1,186 per square foot in Q2, down 2% year over year and about 13% from the peak three years earlier. Resale prices in recently registered buildings averaged $830 per square foot, down roughly 25% from early 2022. The 43% premium of new over resale is unsustainable, and Hildebrand has said he expects it to narrow to around 20% as the HST rebate, worth about $100,000 on a typical unit, and developer discounts do their work. BILD’s June 2026 data put the benchmark new condo price at $1,038,604, which it described as an apparent floor, with 12,579 condo units in remaining inventory across the GTA.

The resale market tells the same story from the other side. TRREB’s September 2026 figures gave an average GTA condo price of $605,257, 24.3% below February 2022, with sales down 5.5% month over month in the City of Toronto and 12.4% in the 905 suburbs. CMHC’s Aled ab Iorwerth has said he expects the sector to be past its bottoming process by 2028 if the economy recovers.

Which developers and projects were caught by the downturn?

The highest-profile casualty is The One at Yonge and Bloor, an 85-storey tower originally developed by Mizrahi Developments that entered receivership in October 2023 with more than $1.9 billion of debt and later moved to CCAA protection. When a court-ordered sales process in 2025 attracted no bidder for the whole project, Tridel was appointed as project, construction and sales manager, and senior secured lenders were owed more than $2.1 billion as of 30 September 2025.

The One shows how a stalled project gets reset. Of the original 415 suites, 345 were presold, mostly in 2017 and 2018, at an average of $1,816 per square foot. Market consultants Milborne Group and Urbanation advised that this was well below what the location now commanded for large and luxury units, while small investor-type suites were oversupplied. The lenders therefore cancelled 314 of the remaining 329 purchase agreements, refunding $105 million of deposits with interest and giving buyers 45 days to rebuy, with a projected $200 million of additional revenue from re-pricing. The structure topped out at 85 storeys, the project was renamed One Bloor West, and a presale relaunch was planned for the second half of 2026 with completion estimated for early 2028.

Earlier failures followed similar patterns. Cresford Developments entered receivership in 2020 after allegations of financial mismanagement, with BCIMC Construction Fund owed more than $320 million on three projects; Concord Pacific paid off $195 million of secured debt to take over The Clover on Yonge Street, where buyers of about 200 of the 499 units had paid more than $48 million of deposits, and the new owner used a CCAA process to renegotiate or cancel contracts. The same playbook, in which buyers who contracted at 2017–2021 prices are cancelled and re-priced, has become routine in Canadian real estate insolvencies.

Below the headline cases, the stress is in the second tier. Insolvency Insider’s listings through 2025 and 2026 include receiverships of mid-sized Toronto projects where construction lenders enforced after presale targets were missed, and bulk listings of 30 or more completed units at a time are now common. Leor Margulies of Robins Appleby, a lawyer who advised through the early-1990s downturn, has described this one as more problematic because it coincides with record completions rather than a shortage of them.

Why are rents falling at the same time as prices?

Rents are falling because record condo completions arrived just as population growth stopped, so the rental supply that investors created is being delivered into shrinking demand. Completions across the GTHA ran at almost 30,000 units a year in 2024 and 2025, most of them small investor-owned suites that went straight into the rental pool, while Statistics Canada recorded national population declines in both the fourth quarter of 2025 and the first quarter of 2026 as temporary-resident numbers were cut.

Rentals.ca and Urbanation’s September 2026 report put average asking rent for apartments and condos in Toronto at $2,554, down 1.4% year over year and the 32nd consecutive month of annual decline; the city’s rents were at their lowest September level since 2021. Nationally, condo rents fell 7.8% year over year against a 2.7% decline for purpose-built apartments, and condo studios fell 9.6%, the steepest of any category. Liv.rent’s Ontario data put an unfurnished one-bedroom in the City of Toronto at $1,973 in September 2026, 3.7% below a year earlier.

For an investor, falling rents compound the closing problem. A unit contracted at $1,300 per square foot in 2021 that now rents for less than it would have in 2023 carries a wider monthly shortfall, and the carrying cost no longer looks like a temporary bridge to a capital gain. Many are selling: active resale listings fell to a three-year low of 7,105 in Q2 2026 as the weakest sellers exited, but that level is still 48% above the ten-year average.

CMHC’s own rental data make the structural point. Toronto’s purpose-built apartment vacancy rate rose to 3.0% in October 2025 with turnover rents on two-bedroom units down 2.5%, while condo rental vacancy was 1.0%. The investor-condo rental stock is cheaper to exit than a purpose-built building, so it is where the adjustment happens first, as the apartment REITs have found in their Ontario leasing spreads.

How does Vancouver’s condo downturn compare?

Vancouver’s downturn started earlier, has been less severe on price and has been absorbed partly by a pivot to purpose-built rental, but its presale machine is just as stalled. The first public sign of trouble came in February 2023 when Coromandel Properties, which owned 17 sites and owed about $700 million, applied for creditor protection; by 2025 Wesgroup Properties had cut 12% of its staff and condo marketer Rennie Group a quarter of its workforce.

The inventory problem is smaller in absolute terms but similar in shape. Rennie’s spring 2025 report projected unsold units in completed Metro Vancouver projects rising more than 60% to about 3,500 by the end of 2025, and CMHC put completed unsold inventory at roughly 2,500 units in autumn 2025, double the prior year and concentrated in Burnaby, Coquitlam and Surrey. Rennie president Greg Zayadi described developer inventory as the highest in 24 years, with new units needing $700 to $900 per square foot that was $200 to $300 above what the market would pay. Flash sales, cash-back incentives at completion and discounted bulk deals to insiders under non-disclosure agreements became common.

Where Vancouver differs is the alternative use. CMHC’s fall 2026 supply report found condo starts down 40% in the first half of 2026 to their lowest since 2011, while purpose-built rentals rose to about 60% of all starts from under 20% a decade earlier. British Columbia’s rental-focused provincial policy, including the BC Builds programme and tax incentives for rental construction, gave developers somewhere to go. In Surrey, the 24-storey Centra tower was listed for sale mid-construction in September 2026 after all its presale contracts were rescinded, with more than $23 million of hard costs already spent.

Investor concentration was also lower. CMHC data cited by the Globe and Mail put investor ownership of Vancouver condos built between 2016 and 2022 at 50.3%, against 56.3% in Toronto, and UDI’s Anne McMullin noted that 22% of land sales over $5 million in early 2025 were court-ordered. Vancouver’s supply gap is also far smaller, 5,000 to 7,000 units a year against Toronto’s 20,000 to 26,000, so the eventual rebound there requires less of a recovery in presale demand. Readers comparing the two can see the regional data in the Toronto city profile.

What does the shrinking pipeline mean for 2027 to 2030?

The pipeline is contracting so sharply that the GTHA is likely to swing from oversupply to undersupply within three years. Urbanation’s completion forecasts fall from almost 30,000 units a year in 2024 and 2025 to 21,850 in 2026, about 14,600 in 2027, roughly 13,000 in 2028 and only about 2,000 in 2029, because projects that have not launched by now cannot complete before the end of the decade. Hildebrand has described this as the largest ever decline in condo supply.

The policy response is aimed squarely at the gap between current inventory and the next cycle. The Ontario HST rebate removes the full 13% on new homes up to $1 million for agreements signed between 1 April 2026 and 31 March 2027, with pre-construction purchases needing a construction start before 31 March 2027 and substantial completion by the end of 2029. The federal–Ontario deal of March 2026 also funds cuts of up to 50% to municipal development charges, which CMHC found had made up 8% to 16% of a new condo’s price in parts of Ontario. Together these are designed to make 2026–27 launches pencil out at prices the resale market will support.

Whether that works depends on the presale buyer returning, and the 2026 data say the investor has not. With only 50 pre-construction sales in Q2 2026, new launches will need either end-user buyers, who want larger suites and fewer of them, or institutional forward purchasers who treat the building as rental from day one. Both change the product: Urbanation notes that 54% of completed unsold units are now over 700 square feet and 57% have two or more bedrooms, a reversal of the micro-suite era. Build Canada Homes and the federal push on factory-built housing are aimed at the same space.

The Bank of Canada, which held its policy rate at 2.25% through its September 2026 decision, remains the swing factor. Five-year fixed mortgage rates around 4.3% to 4.7% in October 2026 are low enough to let completed units clear but not low enough to restart speculative presales; a further cut would do more for launches than any rebate.

What can founders and investors learn from Toronto’s condo bust?

The first lesson is that a business model financed by its customers’ speculation inherits their balance sheets. Toronto’s developers were, in effect, lending their construction risk to thousands of small investors; when those investors could not close, the risk came straight back to the developer and its construction lender. Any founder whose growth depends on pre-orders, deposits or customer-funded inventory should ask what happens to the order book if customers’ own financing disappears.

The second is that lags hide failure. The model broke in 2022 but the bankruptcies, cancellations and record inventory arrived in 2025 and 2026 because the closing cycle is three to five years. Investors who read the 2023 sales data as a pause rather than a regime change paid for it. In long-cycle businesses, the leading indicator is new orders, not deliveries.

The third is that product follows capital. Micro-suites existed because investors, not residents, were the buyers; the shift toward larger suites and institutional rental ownership in 2026 is the market rebuilding around a different capital source. Entrepreneurs serving the sector, from design software to property management, should expect the next cycle’s product to look different from the last.

The fourth is about distress as opportunity. The One’s lenders, Concord Pacific at The Clover, and institutions buying bulk inventory are all using the downturn to acquire well-located, newly built assets at prices the original buyers could not achieve. The same window appears in other Canadian sectors facing structural reset, from department-store real estate to office towers, and it rewards investors with patient capital and the operational capacity to run what they buy.

Frequently Asked Questions