The Current - Canada’s Condo Crash

Episode Date: September 17, 2025

Fewer buyers and rising construction costs are some of the reasons behind the crashing condo market in some of Canada’s major cities. What does this mean for homeowners caught in the fallout? And how will this affect Canada’s housing crisis?

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Hello, I'm Matt Galloway, and this is the, current podcast. If I told you a few years ago that your Toronto or Vancouver condo might not be a sound investment, chances are you would have laughed me out of the room. The Canadian condo market has historically been a very good bet, and investors were able to turn a profit. We'll fast forward to today, and there are cracks, maybe even canyons starting to show. In places like Vancouver and the greater Toronto area, prices and sales have tanked, some builders have cancelled a number of projects and this downturn has left many investors holding the bag and observers wondering what it all means for the housing crisis. Hali Ahmad is a freelance journalist who recently wrote a feature

titled The Condo Crash for McLean's magazine. He's with us in our Toronto studio. Hallie, good morning. Good morning. Thank you for having me. Thanks for being here. Crash is a word that real estate investors and people who were just in that market did not want to hear and thought perhaps that they wouldn't ever hear. What does that look like in in terms of sales and prices in Canada right now? Well, you have to look at what happened right before the crash and what happened was a meteoric rise in prices. So average sales, if you go back to 2005, the average benchmark price was $200,000 in the GTA. And if you go right at the peak, right before the crash, it was over $800,000. When people see that kind of rapid increase, that leads to a rapid number of sales.

People want to get in. They want to invest before the bubble bursts because people always do anticipate that bubble bursting as well. And so how precipitous has the decline been in terms of prices but also sales? Just between 2022 and 2025, the average sales plummeted by nearly 17% in Toronto and nearly 10% in Vancouver. And that translates to hundreds of thousands of dollars. Are those the two areas that are seeing this hit the strongest in Vancouver? And in Toronto? Yeah, because much of the market is driven by investors, and the highest value can get is in Canada's

biggest cities. So that would be Vancouver and Toronto. That's where a lot of the market builds. And so when the prices started dropping, that's where it was felt the most. One of the things that you read about in this piece is that, what, 23,000 condos are sitting or about to be sitting empty in the Toronto area. That's a huge number. What is causing that?

Why are those units going to be empty? I think most people's reaction when they hear that kind of numbers, it almost doesn't make sense because we hear that there's this affordability crisis and people need homes to live and more and more people are coming to the city. So how could there be so many condos sitting empty? For a lot of people, even though the prices have gone down considerably, they're still unaffordable. And because of that, there's a lot of condos that were already built

that aren't for sale yet, but they weren't sold in the pre-construction market. So by that, I mean, what developers do is they try to sell the units before construction is completed or even started. And so you have the ones that have already been built and they're not getting sold. And then you don't have people buying the ones that are being proposed to be built either. So that's what comprises a lot of that 23,000. Places that may not actually even be built.

Yes, correct. Because if developers don't sell enough of those units pre-construction, they can't secure the financing to actually do the construction. Who is this hitting the most? I mean, there are a couple of different scenarios that you tell in the story. And one is of people who, you say, middle class buyers who fell victim to the relentless real estate hype machine. That's one class of people who gets hit by this. Tell us broadly when the market craters, who is being hurt the most?

I would say it's the people at the bottom rung in terms of affordability. that get hit the most because it's all connected. So you could say that if you're to talk about ownership, then condos are the first rung for people to be able to own a home. That's your first stepping stone to something else, perhaps. Precisely, the first stepping stone. And what happens in those cases is if people can't afford to get those condos, that means that it's going to go to people who are investors

who have more finances to be able to buy them. And what they'll do is they'll rent them out. out. And so you're seeing a lot of these units becoming rentals and being leased for prices that a lot of Canadians can't afford. But there are also people who had no intention of moving into these units. And you tell the story of people who bought them purely to flip. What happens with them? If they bought thinking, this is a way for me to make a lot of money. The market's flying. It's never going to crash. I can get in here now. What happens to them? So there's a couple of things that have happened to a lot of people in that situation.

One person I interviewed for the article, his name is Nazar. What happened to him is he was given this proposition by a realtor who was referred to him by a friend. The pitch is simple, as you described, you sign a deal to buy a pre-construction condo. And here's the key thing. You flip it, you sell it before construction is completed and before you need to secure a mortgage or close the deal. And so that way, someone like Nazar, who didn't have that much in terms of resources and savings, it gave him an opportunity to actually buy an asset and then make a profit, turn a quick profit. Because when he bought in early 2022, everything was going up, right?

So even if he spent $800,000 on this, he could probably sell it for more before it's finished and he would make a bit of money. Well, that's the thing. He didn't actually spend $800,000. He only put down the deposit, which was 10%, so around $80,000 on his condo. And what happened in his case was right when he made this deal, the Bank of Canada kind of reversed its course and started raising interest rates. The buyers disappeared. No buyer could be found. And so he got stuck with the condo.

He got stuck having to come up with the rest of the money. And he couldn't qualify for a mortgage because he was already tapped out from the savings he plunked down for the deposit. And so he ended up getting sued by the developer for almost a million dollars. For almost a million dollars. I want to come back to this. Stick around because we have another guest here who's been listening in to our conversation. Nadia Mishabash is a broker, real estate broker in Toronto, and she is with us in our Toronto studios. Well, good morning to you. Good morning. Tell me a little bit more about what you're seeing with clients who invested in this pre-construction. These are buildings that are yet to be built, but they see this as an opportunity to get into the market, maybe make some money under this as well. How are they being impacted by the change in the market right now? A lot of these clients, they're not just speculators and they're not just investors. They are young professionals, their families that just want to get ahead.

They want to purchase real estate to build their wealth or leave it for their children in the future. Without a name, can you give me a scenario? Oh, yeah. Somebody that you know who are a client that has found themselves. I can give you two. Okay. I can even read the response that one of my clients had. So he purchased a couple years ago for $600,000. He bought a one-bedroom.

in downtown Toronto, one bedroom, one bath, and the market dropped. And so he realized that his $600,000 investment turned into $500,000, and a lot of the resale market is now going to $450. And so he comes to me and he says, I don't understand this. Like, you know, I have an assignment clause in my contract. Doesn't that mean that I can sell it? And I said, of course you can, but you need permission from the builder. And they make the decision if they will even allow you to. So you have to go to your lawyer and you have to get the lawyer to go back to the builder and ask. And the response that he got was that they are no longer exercising the right of the assignment clause in his contract for anyone in the building. And he's being forced to close. You're stuck with the place.

Do you think people will lose their deposits? I mean, they put a lot of money down on those places initially. And those deposits are sitting in a trust account with the builder. They have the power to help these people. If they price adjust, if they've purchased a condo for 600, but it's worth 500. And the builder said, well, price adjust for you. You're going to keep your deposit just to close. Then the banks will be able to give them financing. But everybody seems to be turning their back on these buyers and they're kind of stuck, either losing their money or getting sued by the builder. What would you say to people who are listening to this, who think that these investors, I mean, you gambled and you lost. You thought that you could put money into this real

estate market because you would get more money out of it. But sometimes when you gamble, you lose. and that that's the cost of doing business. People are losing their life savings. And it's not as cheap as it was in 2008. When I bought in Liberty Village, my two-bedroom condo for 1,000 square feet, it cost me 350,000. The prices have dramatically changed, which it's affected everybody. Is there a flip side to this as well,

that lower prices for condominiums could actually help people get into the market who otherwise have been priced out? I think first-time homebuyers, it would be a great opportunity for them now to buy resale. But I would step away from pre-construction right now. I think there's just too much volatility. I think it's going to continue. I don't think it's a smart investment at this price point in the interest rates.

I would definitely tell them to buy resale at the moment. In the meantime, these have to be pretty tough conversations with your clients. There's a lot of stress. They are. And, you know, I've had clients crying. I've had clients just, you know, very livid and, you know, screaming. But there's only so much I can do in my position. it really has to be a lot of other players in the game to help these buyers that are losing

their livelihood right now. Some people are going bankrupt. Nadia, thank you very much. You're welcome. Nadia Masharash is a real estate broker in Toronto, Ali Ahmad, who wrote a piece for McLean's magazine about the state of the condo market is still with us in studio. We're going to talk in just a moment about the state of the market broadly and what this means in the face of a housing crisis. But from your perspective, in terms of the research that you did, but also the people that you spoke with. Go back to that. What did I say? 23,000 condos are sitting or about to be sitting

empty just in the Toronto area alone. Is there a way to address that issue in the face of a housing shortage as well? Is there a role for a government to play in that? There's a few challenges when we look at the ones that have already been built or are about to be completed very soon. The issue there is that they were designed for investors. And by that, I mean, they're going to be tiny studio apartments. They're going to be one bedrooms or two bedrooms of very awkward layouts for anyone who wants to raise a family. Not really a place that you can put a family into because it's not big enough. No. So in that sense, those ones are kind of burned already. Like there's not much use for them for a lot of people who want to get homes in cities like Toronto and Vancouver.

So what we need to do is look at alternative solutions and perhaps incentivize the building of purpose-built rentals, which we're starting to see, actually, especially in Toronto, instead of relying on condos to supply our rentals, we can actually just supply them from the beginning instead of going through the route of investors who then rent it out. Allie, thank you very much for this. You're welcome. Ali Ahmad is a freelance journalist in Toronto recently wrote a feature for McLean's magazine, The Condo Crash. From best-selling author and journalist Scott Anderson, King of Kings tells the story of the Iranian Revolution, an event as world-shattering as the French and Russian revolutions.

Based on extensive research and interviews, this spellbinding story is one of a dictator oblivious to the disdain of his subjects and a superpower blundering into disaster. Available now in hardcover and audiobook. Hey, have you heard about Viagra ODF? The most recent addition to the Viagra brand comes in the form of an orally dissolving film strip. In fact, ODF stands for orally dissolving film. You'll be glad to know that Viagra ODF is the same price as the Viagra tablets, leaving the choice up to you and your physician.

If you've been prescribed Viagra or have been thinking about it, talk to your doctor and ask about Viagra ODF strips. Mike Moffat is director of the University of Ottawa's Missing Middle Initiative. Mike, good morning. How would you describe the state of the, I mean, we're using the word crash, condo crash, that is unfolding right now in Toronto and Vancouver. Oh, I would say it's basically a freeze that new pre-construction units are not getting sold in these two markets. And even non-condos, we're seeing a big reduction in.

The market is basically stagnated where nobody's buying, nobody's selling, and are kind of in this period of just everything being stuck. Condos have reshaped cities like Toronto and Vancouver. And as we heard, I mean, often would give people perhaps the opportunity to get into the market for the first time. We know that as investors, and we can talk about specifically investors in a moment, but that that gave them an opportunity to make some money as well. If things freeze, what does that mean in the context of a country that is already in the grips of a housing crisis?

I have a lot of concerns about that, but I'm worried that we won't build things for a few years. And once the economy gets better, we get lower interest rates, we won't have that housing. when that demand comes back and prices are going to shoot up. You're absolutely right that these have transformed communities that over the last 20 to 25 years, there's been a big decline in building ground-oriented housing, single-to-task townhomes and things like that, for, you know, tax reasons for, you know, the fact that we've not allowed our cities to expand for very good reasons with urban growth boundaries and green belts and so on. So that's going to present a challenge for ownership housing where, you know, we can't build out because of those restrictions.

And now with the condo market kind of collapse or freeze or whatever we want to call it, we can't build up. There's not a lot of opportunities left for young people who want to own home. What does it mean for the people who finally got into the market, even though the market was high? They managed to scrape together somehow the money took on perhaps a huge mortgage. And now they're sitting on a property that's worth less than they'd hoped. Plus, they're dealing with higher interest rates than perhaps they're. expected. Where does this leave them? Well, certainly they're in a situation where they probably can't sell or will do everything possible not to sell. And this is not the first time we've seen

this, that in the late 1980s, early 1990s, we had a big home price crash then. Prices didn't recover for about 15 years. And it does cause people to kind of stay where they are. I think those big challenges are with those higher interest rates that we are going to see families having difficulty keeping those homes once their mortgages renew at these higher rates. What impact, and it's not to blame people for being in this, because we heard sometimes it's not people with multiple units, it's somebody who, this is their opportunity to start building wealth. But what impact has using a condo as an investment to turn a profit had on the issues that

we're seeing right now? Well, it is unfortunate that this is the only way we can get condos financed through this kind of pre-construction model. But I think the investors are more of a symptom than the cause of this bubble. Again, I would point it back to very, very low interest rates over the last 20 years. You know, massive population growth through international students, increases in immigration, and so on. And all of those kind of land use changes that I described earlier, that one time we were fueling up demand massively. but at the same time doing all of these things to restrict supply,

that demand supply imbalance creates that environment for investors to want to jump into. But I think it was the policy environment that's the blame. The investors are more of a symptom of a problem than the problem itself. The Prime Minister has set this goal of building almost 500,000 homes a year. There was a huge announcement on the weekend, $13 billion when it comes to looking at what lands could be built on, for example. Given the state of the condo market, who do you think the federal government is actually building for? I think that's a very open question. So Bill Canada homes is very focused on deeply affordable housing for, I'd say, the kind of bottom 10 to 20% of the population when it comes to either income and wealth.

And that's a very good thing. You know, we know we have massive problems in this country with homelessness and secure housing and so on. So that's fantastic. What we're missing is any policy to address the housing challenges of the middle class who are never going to be able to access these government-built homes. There's not been a lot from the federal government that really benefits them and makes it able for the markets or the government to build houses that they can live in. It comes down to a cost issue. Even before the pandemic, the cost of the price of a condo in downtown Toronto was about $1,300 a square. If you want a family-sized home, you're probably looking at a thousand square feet. So you do the math on that, that's 1.3 million. You know, there's not a lot of middle-class families with kids who have the ability or desire to pay $1.3 million to live on the 57th floor of a condo downtown. You know, just the math and the layout just don't work. So I think we should view these small condos as a form of shrinkflation. You know, same way when we go to the grocery store, that pack of cheese, that cereal has gotten smaller in

response to cost increases. That's really what's going on in housing. These units are getting very, very small because the cost of delivery has gotten so out of control. These buildings have reshaped, and people might like them, people might not like them, but they have reshaped big cities like Toronto and Vancouver and other cities across the country as well. If there is a continued downturn in the market, what does that mean for who gets to live and stay in those cities? What this does is follow out the middle class, where they say, you know, I just can't make a go of it here. So they move to some other community. And we've seen that across the world.

You look at places like San Francisco, it doesn't really have much of the middle class anymore. And, you know, teachers, hospitals have trouble finding nurses. And I think that should be a wake-up call for Toronto and Vancouver to see that, you know, you can't have a working society or a working city without. a robust middle class. And is this a blip, the crash, the pop of the bubble that we're seeing right now, or is this a reset of the market? Well, I think it may be a reset. But again, my fear is that it causes nothing to get built for three to four to five years. And then once those market conditions come back, we see the mother of all price increases. So I think we do have some time to sort of figure out where we want the market to go. I think we need all three orders of government

to really lay out a path for the future of housing that works, you know, both for low-income families and for the middle class. Mike, good to speak with you as all. Thank you very much. Thank you for having me. Mike Moffat is director of the University of Ottawa's Missing Middle Initiative. You've been listening to the current podcast. My name is Matt Galloway.

Thanks for listening. I'll talk to you soon. For more CBC podcasts, go to cbc.ca slash podcasts.