Toronto market for new condos continues to crater as sales drop, developers cancel projects

Globe and Mail

15-07-2025

Toronto's preconstruction condo market worsened in the second quarter, with sales sliding to their lowest level in three decades, developers cancelling projects and buyers struggling to close on new purchases.
There were 502 sales of new condos in the Toronto and Hamilton area in the quarter that ended June 30, according to a report released Tuesday by industry research firm Urbanation Inc. That was down 10 per cent from the first quarter of this year and marked the lowest activity since 1993.
The lack of buyers for new condos has led some developers to delay or cancel planned projects because they typically need to sell at least 70 per cent of a project to qualify for construction financing.
'The market has gone from bad to terrible,' Urbanation president Shaun Hildebrand said in an interview.
Across the Toronto and Hamilton region, according to Urbanation, 21 developments amounting to 4,412 condo units have been cancelled over the past year and a half, which is the highest level since 2018. Four projects were cancelled over the past three months, including projects from developers Diamond Kilmer Developments and 95 Developments.
Developers had already postponed or shelved numerous projects since the country's real estate market started slowing in 2022. In the past quarter, only three projects with a total of 891 units were launched, according to Urbanation. That is 86-per-cent lower than the 10-year average for the second quarter.
Investors, who used to account for at least 70 per cent of the preconstruction condo sales, are no longer interested given that many of their purchases are now money-losing investments.
Buyers have been having a hard time closing on their purchases because their properties are worth less than what they agreed to pay in earlier years.
When a buyer is due to close, lenders typically only provide a mortgage based on the current value, not the price that the buyer agreed to pay. Because appraisals are coming in 10-to-30 per cent below a condo's original selling price, the buyer has to come up with the difference.
Urbanation research shows that the vast majority of condos that were ready to be occupied in the second quarter were presold at an average price of $1,187 per square foot. By comparison, resale prices in newly built condo buildings averaged $903 per square foot, which is down 24 per cent from the original price.
That shortfall is one of the reasons some buyers are defaulting on their purchase agreements. If a buyer is unable to close, the developer has to try sell the unit again or keep it on its books.
That may be contributing to a record number of 2,478 condo units that were completed and being marketed for sale as of the second quarter, according to the report. That is double the amount from last year and five times higher than two years ago.
Mr. Hildebrand said that number is likely conservative, as some buyers are still in the process of trying to close.
'I would say that there's many more units that the developers have on their books that they aren't necessarily making available for purchase right now because they're still trying to get the buyers to close,' he said.
Investors who are able to close are facing their own issues. Many are burning through cash every month because they either can't find a renter or the rent they are charging is not enough to cover their condo fees and mortgage payments.
The slowdown has hit the residential development industry with prominent companies such as Mattamy Homes, Great Gulf, Rennie & Associates Realty Ltd. and MLA Canada Realty cutting jobs.
The market is not expected to rebound in the near term. There's still a record number of 17,117 condo units that are under construction and due to be completed over the next six months, for a total of 31,422 in the Toronto and Hamilton region this year.
It is a difficult market for developers. Diamond Kilmer canceled a condo project in the east end of Toronto in the spring.
'Given the current market landscape, it's essential that we take the time to refine this project so it better aligns with evolving needs and expectations,' Ty Diamond, the developer's president said in an e-mailed statement.
'In the interim, all purchaser deposits have been returned in full, with interest.'
In Markham, north of Toronto, 95 Developments canceled a small project. Last year, developer Aoyuan International canceled a large condo project to north of the city. Aoyuan and 95 Developments did not immediately respond to a request for comment.
Meanwhile, some developers such as Marlin Spring are turning their condo projects into rental buildings. Marlin's chief sales and marketing officer, Erin Millar, said the developer would be making an announcement about the project in August.
According to Urbanation, nine of the projects canceled over the past 18 months are being converted to rental.