This trend is beginning to ripple through the wider property sector. New analysis from the Canada Mortgage and Housing Corporation (CMHC) highlights growing concern that current market conditions may stall future efforts to expand housing supply.
While recent price declines offer short-term respite for buyers and renters in two of the country’s most expensive cities, the long-term impact could be damaging. Reduced returns on investment and weakening buyer sentiment are deterring new development. This is creating a risk of exacerbating the national housing shortage in the future.
The downturn has been sharp. Between 2022 and early 2025, condominium sales in Toronto plunged by 75 per cent. Vancouver saw a 37 per cent drop. Many units that were pre-sold during the earlier boom are now being completed, adding to a growing surplus of unsold inventory.
Toronto, where the slowdown is most severe, saw pre-construction condo inventory rise to levels over 14 times higher than in 2022. Average resale prices in the city have fallen 13.4 per cent, with some owners forced to sell below their purchase price. In Vancouver, prices dipped 2.7 per cent, and developers are turning to cancellations or conversions into rental properties.
The current malaise follows a period of strong growth fuelled by ultra-low interest rates during and immediately after the COVID-19 pandemic. That borrowing environment spurred a building boom, with investors keen to tap into what seemed like an unstoppable market. However, rising interest rates from 2022 onwards quickly reversed this trend.
The challenging economic environment has further weighed on consumer sentiment. Many investors who purchased pre-construction condos in recent years now face significant capital losses. Units once valued near the million-dollar mark now sell for $700,000 to $750,000.
This weakening confidence is also affecting new developments. CMHC data shows that over half of the pre-construction units in Toronto in 2024 and early 2025 remained unsold. This is significant because many projects require at least 70 per cent of units to be pre-sold to secure financing. As a result, project cancellations have surged.
Though some developers are pivoting to build purpose-designed rental housing, the overall pipeline of new housing completions is slowing. Economists warn this could undermine the government’s plans to address Canada’s housing crisis by ramping up supply.
While a market rebound is possible, the current landscape suggests more challenges ahead. With construction slowing and investor appetite diminished, Canada’s most populous cities may experience a renewed housing shortage sooner than expected.
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