The Toronto condominium market continues to captivate and confuse homebuyers, investors and industry watchers alike. Despite endless headlines speculating about investors’ influence, recent data clearly outlines their critical role in shaping this market.

According to Statistics Canada, nearly 39 per cent of condominium units in Toronto’s Census Metropolitan Area (CMA) in 2022 were owned by investors. But who are these investors, and what exactly are they buying? Diving deeper, the data reveals a marked preference for smaller units: Investors owned 65 per cent of condos less than 600 sq. ft., compared to just 44 per cent of units of more than 800 sq. ft. Smaller units appeal to investors not only because of higher rent per-sq.-ft. but also due to their lower down payments, quicker marketability at completion, and their attractiveness to young, cost-conscious renters.

Hidden opportunities

While investors continue to shape what gets built, the condo market itself has been navigating turbulent waters. In 2024 alone, the GTA saw the cancellation of 14 condo projects comprising 2,805 units – the highest cancellation rate since the peak of pandemic-induced uncertainty in 2020 (per Zonda Urban). Factors such as rising construction costs, elevated interest rates, and broader economic volatility contributed to these cancellations. As a result, the average asking price per-sq.-ft. for new unsold condos fell by 10 per cent from their peak in the third quarter of 2022, with further price declines of about 7.3 per cent forecasted for 2025 (per Bullpen Consulting).

For new-home buyers, this environment presents both hurdles and hidden opportunities. Understandably, first-time purchasers are cautious. The prospect of project cancellations, coupled with anticipated price declines, creates hesitation about investing in pre-construction condominiums. Yet, despite these short-term challenges, the projected decrease in condo prices could offer a window of affordability, providing buyers who time the market correctly with a valuable entry point.

However, buyers and investors pulling back today have significant implications for tomorrow. The current slump in sales – just 4,600 new condo sales in 2024, the lowest since 1996, as I’ve highlighted in Bullpen Consulting’s newsletter – points towards a severe undersupply emerging as soon as 2027. Annual apartment completions in Toronto, exceeding 30,000 units in recent years, could drop dramatically below 10,000 units by 2028. Such a shortage inevitably sets the stage for another wave of intense price and rental inflation reminiscent of past boom cycles.

In the interim, many cautious homebuyers might pivot toward the resale market instead. The Toronto Regional Real Estate Board (TRREB) forecasts moderate recovery in this sector, projecting a 12.4-per-cent increase in sales in 2025, along with a modest 2.6-per-cent rise in average selling prices. Importantly, TRREB anticipates single-family homes to experience more substantial price gains compared to condos, given the more significant inventory currently available in the condominium apartment market.

Critical juncture

Toronto’s condo market finds itself at a critical juncture, balancing short-term caution against long-term structural challenges. For new-home buyers, staying informed through credible resources, such as industry reports or even the Toronto Under Construction podcast, is crucial for navigating these dynamic conditions and making prudent investment decisions. I always recommend doing a lot of research on your own, surrounding yourself with an experienced team and adhere to your budget. Good luck.