Sales are slowing, inventory is rising, and developers are scrambling to adapt. Experts are calling it a “glut” — but what’s really driving the crisis, and how does it compare to the condo crash of the 1990s?
Déjà Vu or Something New?
The Canada Mortgage and Housing Corporation (CMHC) has sounded the alarm: Toronto is experiencing declining sales, rising cancellations, and investors facing financial stress as condo values soften. Some veteran realtors say the moment feels eerily similar to 1989, when an oversupply of units and inflated investor demand triggered steep losses and halted new construction.
Yet, there are differences. Today’s lending rules require builders to pre-sell at least 70% of units before construction financing is approved, curbing unchecked speculation. Plus, Canada’s economy—while fragile—is more stable than during the early 1990s recession.
Ontario’s Shrinking Pipeline
The Ontario Home Builders Association (OHBA) projects only 40,000 new homes will be built in 2025 — less than half of the annual average just a few years ago. Complicating matters, over 37,000 new homes (many of them condos) are already sitting vacant without buyers.
So why aren’t families buying? One reason is design. Toronto’s condo approvals often prioritized one-bedroom units, ignoring the needs of families with children. Meanwhile, retirees are choosing to “age in place,” shrinking the downsizing market.
Costs, Delays, and Policy Barriers
Government fees and red tape are compounding the problem. According to OHBA, nearly 36% of a new home’s price comes from development charges, HST, and permits. With 444 municipalities each operating under different systems, timelines stretch from five to seven years before shovels even hit the ground.
Some cities, like Barrie, are cutting development fees in half to encourage construction — a move that can shave $50,000 or more off a home’s final price.
Developers Shift to Rentals
As demand weakens, many developers are pivoting. Condo projects are being repurposed into purpose-built rentals, transforming unsold units into long-term income properties. While this helps ease Ontario’s rental crunch, it leaves would-be buyers waiting on the sidelines for more affordability measures and government incentives to kick in.
The Road Ahead
Ontario’s condo crisis reflects a broader affordability and supply challenge. Rising costs, bureaucratic delays, and mismatched housing supply have left buyers cautious and developers scrambling. Without bold action, the province risks a prolonged glut that could drag down market confidence.
But for savvy investors and strategic buyers, market corrections also create opportunity — if you know where to look.
📞 At Lendworth, we help investors and borrowers navigate turbulent markets with tailored, asset-backed mortgage solutions. Whether you’re looking to invest in Ontario’s real estate or secure flexible financing, our team can guide you through the shifting landscape.
Contact us today at 905-597-1225 or email info@lendworth.ca to explore opportunities.