This is poised to be a pivotal year in Toronto’s new condominium market, presenting a complex mix of challenges and opportunities for prospective buyers. After a period of sustained growth, the market is now navigating declining prices, a shift in investor behaviours, and the rise of purpose-built rentals. For first-time buyers, these dynamics could create a unique window to purchase a quality property at a discounted price.

Since 2008, Toronto’s condo market has become increasingly dominated by investors. The share of investor-owned units has more than doubled, from 19 per cent in 2008 to 41 per cent by late 2024. In 2024 alone, Bullpen Consulting used CMHC data to estimate that nearly 70 per cent of new condo completions were added to the rental market. This trend benefits tenants with access to newer, amenity-rich rental units, however, many uniformed commentators continue to claim the trend hurts affordability. In the absence of pre-construction investors, as is the case today, developers are not securing enough sales upfront to qualify for construction financing, leading to fewer buildings getting built and a lack of supply in the market in the future, which hurts affordability.

Market uncertainty

Higher interest rates, increased competition, a weak economy and general market uncertainty, has reduced both investor and end-user demand, and Toronto’s condo market has experienced a sharp slowdown in sales activity, reaching historically low levels in 2024. Annual sales volumes fell to levels not experienced since the mid-1990s. Prices, too, have been on the decline. By Q4 2024, the average asking price for unsold new condos dropped to $1,524 per-sq.-ft. (psf) in Toronto per data from Bullpen, a 10-per-cent decrease from the 2022 peak of $1,690 psf. Looking ahead, further declines of 7.3 per cent in Toronto and 6.1 per cent in suburban markets are forecast for 2025.

While these conditions reflect challenges for developers and investors, they may provide a rare opportunity for first-time buyers to enter the market at more affordable prices. Buyers who act strategically in 2025 could benefit from softer pricing and increased inventory, particularly in high-density areas where developers are motivated to offload completed units.

Another near-record number of condo completions is expected in the GTA in 2025, further boosting supply in an already slowing market. This surge in inventory may place additional downward pressure on both rents and sale prices, creating potential deals for buyers willing to act decisively. However, the longer-term outlook suggests that this abundance of supply may be short-lived.

Importance of timing

The low volume of land sales and project launches in 2023 and 2024 is likely to create a supply crunch starting in 2026. As fewer new projects started construction over the last couple of years, the availability of condos for purchase could shrink significantly in 18 to 24 months, leading to upward pressure on prices. For buyers considering entering the market in 2025, this looming supply constraint underscores the importance of timing. It has been said repeatedly that time in the market is more important than timing the market, but acting during the current period of abundant inventory may offer opportunities that become increasingly scarce in the years ahead.

The current market environment has placed significant pressure on condo developers and investors. Declining prices and high financing costs have made it increasingly difficult to achieve profitability for both groups.

Cautious optimism

Despite these headwinds, there is cautious optimism for the future. As interest rates begin to decline, confidence in the market is expected to return. Developers are likely to resume project launches, albeit at a much more measured pace, while investors may re-enter the market with renewed enthusiasm in select locations at the right price. For end-user buyers, this transitional period offers a critical opportunity to secure a foothold in the market before conditions tighten once again.

For those ready to take the plunge, 2025 represents a chance to secure a home and build equity in one of Canada’s most dynamic real estate markets. By staying informed and acting decisively, buyers can turn the challenges of today into the opportunities of tomorrow. Surround yourself with a good team, do a lot of research and make an informed decision. Good luck.