Toronto’s condominium construction sector suffered a historic collapse in 2025, setting the stage for a potentially deeper housing shortage later this decade—one that experts warn could push home prices and rents even higher.
After years of near-constant building that reshaped the city’s skyline, condo development in Toronto has slowed to a near standstill. Through the end of September, just 2,540 new condo units broke ground in the city, the lowest level recorded since at least 1998, when Ontario’s Condominium Act came into force. That represents a 79 per cent decline from last year, according to data from the Canada Mortgage and Housing Corporation (CMHC).
Sales have fallen even more sharply. Between January and October 2025, only 714 new condo units were sold in Toronto, down 61 per cent from the same period last year and 86 per cent compared with 2023, according to the Altus Group. July marked the weakest month, with just 54 units sold.
A delayed housing crunch
The effects of today’s construction freeze will not be immediate, but experts say they will be significant. Condo projects typically take three to five years to complete, meaning buildings meant to deliver new homes in 2027 and 2028 would have needed to start construction in 2024 or 2025.
“They didn’t,” said Mike Moffatt, founding director of the Missing Middle Initiative at the University of Ottawa. “We’re likely not going to see a whole lot of new inventory coming on the market over the next few years, which is going to cause issues.”
CMHC economist Jordan Nanowski expects condo starts in Toronto to remain “extraordinarily low” in the near term.
While more than 24,000 newly built units remain unsold across the Greater Toronto and Hamilton Area, according to Urbanation, developers say those units will eventually be absorbed. About 35,000 units currently under construction are expected to come to market over the next two years, CMHC data shows.
After that, the development pipeline thins dramatically.
When supply tightens in 2027 and 2028, economists warn competition among buyers and renters could intensify, putting renewed upward pressure on prices.
How condos became Toronto’s default housing
For decades, condominiums were Toronto’s primary form of new housing, reflecting a city that had little room left to expand outward. Instead, growth went vertical.
The model relied heavily on pre-construction buyers—often investors—who purchased units years before completion. Many of those investor-owned condos became rental units, supplying much of Toronto’s purpose-built rental stock and making large towers financially viable.
That system held together as long as borrowing costs remained low and resale prices and rents continued to climb.
What broke the model
Rising interest rates in 2022 and 2023 upended that equation.
Mortgage rates jumped from pandemic-era lows below two per cent to roughly four or five per cent. Investors who had expected rental income to cover carrying costs found themselves squeezed, while falling resale prices undercut condo flipping and assignment sales.
Even though new condo prices have dropped nearly 10 per cent over the past two years—to an average of $1,199 per square foot in the third quarter of 2025, according to Urbanation—higher interest rates have left many buyers facing steeper monthly payments.
With prices declining, condos no longer appear to be a guaranteed investment. “No one wants to catch a falling knife,” said broker Karolina Armstrong.
The slowdown also coincides with shifting demographics. Toronto’s recent population surge—driven largely by international students and temporary workers—has begun to ease as Ottawa reduces immigration targets. Fewer newcomers are arriving, and some who once fuelled rental demand are leaving.
Financing hurdles and rising costs
Weak sales have created a direct barrier to construction. Developers typically need to pre-sell about 70 per cent of units before lenders will release financing. In the first quarter of 2025, only 45 per cent of Toronto’s pre-construction units had secured buyers, down from 85 per cent two years earlier and a peak of 94 per cent in early 2022.
Projects that cannot meet that threshold are being shelved indefinitely.
At the same time, construction costs have soared. High-rise building costs are up 76 per cent, according to Altus Group, while municipal development charges have risen sharply. The City of Toronto now charges nearly $53,000 in development fees for a one-bedroom condo, up from $8,300 in 2013. For larger units, fees have climbed to nearly $81,000.
“We can’t sell for the amount that the homeowner wants to buy for,” said developer Mitch Gascoyne of CentreCourt.
Cancellations and a pivot to rentals
Across the GTHA, at least 18 condo projects representing 4,040 units have been cancelled this year, Urbanation reports. Another 20 projects, totalling 4,187 units, are either on hold or in receivership, with a high likelihood of cancellation.
Some stalled condo developments are being converted into purpose-built rental housing. Urbanation says 61 projects—representing more than 27,000 units—have switched from condo plans to rental this year, encouraged by federal incentives such as low-cost loans and tax relief.
Still, experts caution that the rental boom will not fully replace the lost condo supply.
Broader ripple effects
The construction slowdown is also straining Toronto’s finances. The city expects to collect just $137 million in development charges this year, a 74 per cent drop from the 10-year historical average. City officials warn the shortfall could force delays or cancellations of infrastructure projects needed to support growth.
Employment has also taken a hit. Construction jobs in Toronto have fallen by more than 34,000 since late 2023, and unemployment in the sector reached 10 per cent this spring.
Nanowski warns that as skilled workers leave the industry or the region, the city could face capacity challenges when the housing market eventually rebounds—potentially making the next recovery slower and more expensive.