Plummeting Prices Spell Trouble for Housing Supply

Falling condo prices and rents in Toronto and Vancouver are triggering a concerning slowdown in construction, putting future housing supply at risk, warns the Canada Mortgage and Housing Corporation (CMHC).

With sales in freefall as new units flood the market, the CMHC highlights a grim outlook where recent economic uncertainties show "little indication" of a quick recovery for prices and rents.

Short-Term Relief or Long-Term Crisis?

While buyers and renters might rejoice at more affordable prices, the analysis indicates a darker side—this trend threatens to stifle new construction and worsen existing housing shortages in the long run. Before the pandemic, historically low interest rates fueled demand and a condo boom. However, the spike in interest rates in 2022 has squeezed affordability for homebuyers and diminished investor returns.

Buyer Sentiment Hits Rock Bottom

A chilling statement from John Pasalis, president of Realosophy, reveals just how far buyer sentiment has fallen: "We're seeing the lowest demand in two decades, with inventory piling up." CMHC reports that between 2022 and early 2025, condo sales plummeted by 75% in Toronto and 37% in Vancouver.

Record Inventory, Shrinking Prices

Toronto's pre-construction condo inventory has skyrocketed, now over 14 times higher than in 2022, while average resale prices have dropped dramatically—13.4% in Toronto and 2.7% in Vancouver. For many, condos bought in recent years are now valued significantly less, with some owners seeing their once-million-dollar investments fall to just $700,000.

A Grim Forecast for Investors

Investors aren't escaping unscathed. Many Toronto investors face capital losses of up to 6% on their 2024 pre-construction acquisitions. The market's transformation has left units purchased a few years ago now worth a fraction of their original prices—leading to heart-wrenching losses.

Government Promises vs. Market Reality

Economists attribute part of Canada's housing crisis to a persistent mismatch between supply and population growth. While the federal government has pledged to boost housing supply, skepticism remains regarding the effectiveness of these policies.

Cancellations on the Rise: A Dismal Future?

With many newly completed units still unsold, 2024 and early 2025 show a worrying trend: around 55% of Toronto's pre-construction units went unsold, raising alarms over project viability. The CMHC notes a staggering rise in unit cancellations compared to previous years, with some developers switching to purpose-built rentals due to these challenges.

A Hopeful Turn Ahead?

Experts like Pasalis suggest that a resolution to trade tensions and a revival of consumer confidence could turn the tide. However, he warns that if the economy falters due to ongoing trade disputes, the condo market could face even graver challenges.