Toronto’s condo market makes a wretched start to 2026

Amid a wider cooldown in Canada’s housing market, Toronto’s condo woes have been among the biggest real estate stories of the past two years, hitting investors and owner-occupiers alike.

But while owners saddled with buyer’s remorse in the city’s flailing condo market are desperate to see that crisis ease, experts say the sector’s turning point isn’t in sight yet.

Just 85 new condominium units were sold across the Greater Toronto Area (GTA) in January, according to data released on Tuesday by the Building Industry and Land Development Association (BILD) and Altus Group.

And price declines for all types of condo units across the region are nowhere close to levelling off, signalling that the deep correction at play doesn’t seem to have run its course.

Dan Eisner, founder and chief executive officer of True North Mortgage, told Canadian Mortgage Professional he sees no sign that the fiasco will be coming to an end in 2026.

Part of the problem is the huge oversupply of cramped studio condos, whose popularity has cratered thanks to a big reduction in international student numbers and significantly lower rental demand.

That trend doesn’t seem likely to be a short-term one. The federal government initially announced plans to welcome half a million permanent residents a year in 2025 and 2026 – but trimmed those targets and set a goal of 365,000 arrivals in 2027.

“I don’t see a bottom yet,” Eisner said. “If the Canadian government came out and said, ‘We’re increasing immigration back to the levels seen under [former Prime Minister] Trudeau,’ then I would say, ‘OK, we’re going to see a bottom.’ But I don’t see that.”

That suggests further hurdles ahead for condo owners – and buyers who purchased a preconstruction condo in recent years only to see the appraised value come in much lower than their original purchase price.

Few good options for struggling condo owners and buyers

The outlook has darkened considerably for condo owners in Toronto since the Bank of Canada began hiking interest rates in 2022, suddenly creating an affordability nightmare with no easy way out.

“If you were struggling to make your mortgage payment in the past, you could sell and get your equity out and then that makes you happy, makes the bank happy, and off you go,” Eisner said. “And there were no arrears.

“Or you could just hang in there. But now for a lot of people, especially condo owners who are underwater in their mortgage, option one is off the table. Because if they sell, they don’t get their money back. And then they still owe money on the mortgage afterwards which means that the lender won’t release title.”

The slump is good news for buyers who found themselves priced out of the market when speculation was at its height, but can now take a second look at a purchase – even if affordability is still strained in plenty of cases.

But many are sitting back and taking a wait-and-see approach as prices dive even further. That goes for investors, too.

“Would you buy now or would you buy in six months? Or would you buy a year from now?” Eisner said. “Even with the premise that these condos are going to go up in value in five years, you’re still hesitating to buy right now because maybe you can buy in six months and get it 10% cheaper. Maybe buy a year from now, you get even 20% cheaper.”

Could the Toronto condo crisis spiral into a wider disaster?

Some might wonder why the condo crash hasn’t spilled over into the wider housing market, or whether it could ultimately devolve into a complete meltdown.

Eisner, though, sees that as an unlikely prospect – even if it will take years for the market to gather pace again.

That’s because condo construction has ground to an almost complete halt in the GTA, meaning demand will slowly but surely begin to eat into the mountain of supply that’s available now and coming on stream shortly.

“As no new condos are being built, that spells almost certain disaster for condo pricing,” he said. “If you’re a buyer, it’ll be bad for you in a few years because you’ll see condo prices shoot up as all that inventory gets picked up and there’s no new inventory to hit the market.

“If you can find a quality condo which is 750 square feet-plus, then you’re probably good. That’s where investors are going to move first – into those markets where [condos] are livable and the layout makes sense.

“If you see those properties starting to get picked up, then you know that you’re getting close to the bottom because that’s where the investors will come first.”

Source CMP
By Fergal McAlinden