Bad to worse

Just a day after telling you how gross the condo market is, it’s worse.

“The market has entered a phase of the downturn that is really starting to wreak havoc. Project cancellations are mounting, construction starts are collapsing, jobs are being lost, buyers are losing a lot of money, and developers are facing difficulties with closings,” says analytics firm Urbanation, speaking of the massive GTA industry.

CMHC tells us apartment sales have collapsed almost 40% in Vancouver from 2022 levels, and are off 75% in the Toronto region. Prices in the largest market have dipped 13% from the peak, and are eroding at the rate of 6% annually now. Some people think that will accelerate. Values in YVR have been more resilient, off 3%.

Currently about 2,500 new units in Toronto have been built, are ready for occupancy, and sit unsold. Another 14,000 are available in the pre-con and construction phases. An almost-equal number have been listed by current owners on the resale market. Overall, this one market has in excess of 32,000 properties of all types seeking buyers.

How bad is the situation compared to prior years? Gaze at this summary. We appear to be on our way to a sales total of… zero.

Are condo sales in this market on the way to zero?

Canada’s condo inventory is up 400% in the last three years, says a report from CoStar Group. Lots of these units are of the dog-crate variety, which only had a decent rental return when the country was welcoming more immigrants, temp workers and especially international students. Now, they’re largely gone. More vacancies. Lower rents. Money-losing landlords. Condo values fading. And a worsening local economy.

Combined with rising ownership costs – property taxes, condo fees and insurance – while mortgage rates stay stuck at more elevated levels, investors who own half these units are in negative cash flow every single month. It’s a nightmare. Capital value (and equity) dropping relentlessly as the market collapses, plus high fixed costs which rents cannot cover. And no solution in sight. In fact, things are probably going to worsen.

Projects are being cancelled at a helluva clip – in Toronto five times greater since 2022 and ten times more in Van. Major developers and builders have been loading up on debt, borrowing against their unsold inventory to try and stay afloat, as they dump employees. Pre-con units are losing value even before the concrete is poured. The assignment market is wild as thousands of buyers try to bail out at steep losses before they’re forced to close their deals.

No wonder. The investors and speculators who bought from plans three or four years ago paid a stiff premium – as much as 30% more than existing resale units – because it was a futures play. Everyone assumed prices would continue to escalate along with inflation and building costs. But then, the wheels came off. Rate cuts halted. Trump and tariffs materialized. Immigration levels were hacked. Investors retreated and buyer confidence fizzled.

Recent price and sales declines have been the fastest in living memory.

It’s classic. Demand has fallen off a cliff, just as supply is surging as never before. Last year alone almost 16,000 newly-built condo units came online in Toronto with another 12,500 materializing in Vancouver. CMHC says Toronto has a stunning 14 more months of inventory than it did three years ago. At the current rate of sales, there is a 58-month supply. Yes, until the year 2030.

Why would any developer launch new projects in an environment like this?

Why are governments pulling out all the stops to add 500,000 more units a year of housing stock?

People with a condo they’ve must dump are being told it will take at least a year to find a buyer, and  multiple price reductions will be required to snag one. For anyone who bought since the pandemic, this probably means a loss. After paying land transfer tax and closing costs, then commissions and selling charges, capital gains have vanished.

Only time will tell if the collapse of a major part of the real estate market spills over into detached and single-family neighbourhoods, maybe even into the wider economy. Or will the Bank of Canada ride to the rescue, starting on the morning of July 30th?

To be continued.

About the picture: “Hi Garth…this is my grandson Olin with an about to be adopted miniature dachshund,” writes Rick. “She is likely to be named Molly, when she is old enough to leave her litter. Thanks for all you & your team do.”

To be in touch or send a picture of your beast, email to ‘garth@garth.ca’.

Source: https://www.greaterfool.ca/2025/07/18/bad-to-worse/