The Decibel - What’s up with Canada’s condo market?

Episode Date: July 29, 2026

The Canadian condo market is crumbling. As prices continue to plummet, thousands of condo units sit empty and unsold in Vancouver and Toronto – two of Canada’s largest real estate markets. While buyers grow increasingly hesitant, both federal and provincial governments are trying different tactics to revive the market, with degrees of success. The Globe’s real estate reporter, Rachelle Younglai joins The Decibel to talk about how the condo market ended up in this state, what’s being done about it and what its future may hold. Questions? Comments? Ideas? Email us at [e-mail] Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

The Canadian condo market is in dire straits. Thousands of condo units are sitting unsold in places like Vancouver and Toronto. Prices are tumbling and buyers are increasingly hesitant. But federal and provincial governments are trying different tactics to resuscitate the market, to varying degrees of success. So today we have the Globe's real estate reporter Rachel Youngly on the show. She'll tell us how the condo market ended up in this. state and what's being done about it. I'm Rachel Levin McLaughlin in for Cheryl Sutherland,

and this is the decibel from the Globe and Mail. Rachel, thanks for joining us. Thank you. Thanks for having me. So can you help me understand just how bad the condo market is right now? How many units are sitting there at the moment? Yeah, the new condo market is in a slump. Has been for several years now. In the Toronto region, we have more than 5,000 units that are newly built and sitting there empty. In the Vancouver region, we have around 4,000 that are newly built and sitting empty. And so in the Toronto region, if we look at condos that are under construction or condos that are projects that have been launched and the developer is still selling, trying to sell those units, We have more than 13,000 units that are not sold.

So that includes the ones that have been recently built and then the ones that are under construction or the ones that are still being sold pre-construction. That makes sense. Yeah. And I should say that the number is even higher than that, but we just don't know the exact number because buyers have been defaulting on their purchases. And so that 13,000 number doesn't include the number of units that. developers have had to take back because buyers have defaulted on their units. Wow. So it could be even higher than 13,000?

Wow. And what about Vancouver? Do we have a sense of what Vancouver is at? Yeah. So same situation where we don't know the number of units that developers have had to take back. And I'm afraid I don't know the number that's currently under construction, but it's safe to say that there's more than 4,000 that are unsold. And what are the prices of those units looking like?

What's the market looking like on that sense around prices? Yeah, so the average asking price for these new units haven't dropped as much as you would expect. So if you compare it to the resale market, so condos that have been around for years, it's still much higher than the resale market in both Toronto and Vancouver. But it has come down. But I was just giving you an example. So in the Toronto region, the average asking price for a newly constructed. condo is just over a million. And in the Vancouver region, it's just over $800,000.

So then what is it for the resale market? What's the resale market looking like right now? So if you compare it to the resale market, new condos are still much higher than the resale market. So in Toronto, average asking price for new condos is over a million. And then on the resale, it's just over $600,000. So a big difference there. A lot less, yeah. Yeah. And then in Vancouver, same thing, just over 800,000 for new construction and over 600,000 on the resale. Why is there such a difference in the price between resale and new condos? Developers have spent a lot of money building these new condo buildings, so it's difficult for them to drop the price. And when you compare that to condos on the resale market, there's just so many more condos

built anywhere from the 80s and later dates that are on the resale market. the market. And so they're just selling at a much cheaper price. It feels like we've heard a lot about the downturn in the condo market for a couple of years now. So I'm curious how this moment compares to the last couple years. Well, we're at a point where a lot of new product is coming to market, as in developers have been building these buildings for years and now they're completing them. So over the past three years, we've had thousands. of units hit the market. So we just have a lot of supply coming on stream. Okay. So we know this is happening in places like Vancouver and Toronto. What about other

regions in Canada? Are they seeing the same thing? They're not seeing the same issue as Toronto and Vancouver. And I would say that even Vancouver is not experiencing the same type of downturn that Toronto is experiencing because Toronto is just a much larger market and there was a lot more selling and development of condos. So Toronto is in a unique position. How did we get here? Why do we have so many condos right now? For years, we've had a lot of demand for housing from people who want to live in a condo, but also there's been a lot of demand from individual investors.

And so it's just this insatiable demand for real estate has led to developers developing more condo towers to fulfill that demand. So there's demand for housing for people to live in, but demand from investors to buy properties as a way to make money either on the rental or make money on price appreciation. And for over a decade, we've seen prices go up constantly. So it was a no-brainer for a lot of investors to buy a condo because you could make money, easily make money. And so what happened with the price of construction? and how did that kind of impact the supply that we were having or the prices of the supply?

Yeah, that's a good point. As the demand for condos increased, but the cost of construction has also increased because it became harder to find people to build the condos because there's so much building going on and not just in condos. There was other types of infrastructure that was being built. So there was a competition for labor for construction workers. and so that helped push up the price of construction. Was the pandemic a factor in there? Construction prices went up in the pandemic. Am I wrong?

Yeah, no, you're correct. It did go up because of supply chain issues. Yeah, there were like shortages of materials. It was hard getting material, some materials into Canada. So that all contributed to a jump in construction costs. So does then that increase the price of the condo? Yes, absolutely. It increases the price of the condo.

So, yeah. Okay. So we have this huge boom of construction. Construction prices are going up. Condo prices are going up. Then what happens? Yeah. So then the Trudeau government decided to curb immigration, to put a cap on immigration because the share number of temporary residents that were coming into the country were contributing to this huge demand for housing. So the Trudeau government reversed their immigration policies and put a cap on foreign students and a cap on temporary foreign workers and said that eventually they only wanted temporary residents to be about 5% of the total population. And at the height of our immigration, temporary residents accounted for just over 7% of our total population. So it was a big change in the number of new people that were coming to the. the country. So when those policies came into effect in 2024, we saw a big drop in foreign students and a drop in temporary foreign workers. And that contributed to this slowdown and demand for rentals, which really had an impact on people who own these condos who are trying to rent them out. So there

was less demand for rentals. And is this happening just with condos? Are we seeing this with houses as well? No, no, no. We're really seeing this take place in the condo market. And for the longest time, condos, especially in Toronto, they made up a very big part of our rental market. Not so much houses and townhomes, but condos, because there's just so many of them. Is there anything else going into the drop in demand for condos? Yes, the individual investor, so the mom and pop investor, they are not interested in buying condos anymore for many reasons. One is the rent that they're charging is not high enough to cover expenses like condo fees.

If you have a mortgage on the condo is not enough to cover your mortgage payments, your condo fees, your property taxes. So they're basically burning through their own cash every single month, which is, you know, I guess for an investor, you can take that loss if you think at some point you're going to make money by selling the actual unit. but because real estate prices, especially for condos, have not increased. In fact, they've been dropping ever since 2022. They can't expect the value of that condo to go up anymore. So they're taking losses on the value of the condo. So there's just no demand from individual investors. And they were responsible for buying so many of the units.

Wow, that's so interesting. I'm also curious, at least from where I said, It felt like condos kind of became the starter home for young people who was like a way to get into the market. Did that change? Yeah, I would say it did change because the price increased so much. So in 2013, for example, you could probably buy a condo in Toronto for $300,000. There's no way you could buy a condo for $300,000 today, even with prices falling. So we have the surplus in condos, but we also know that we need more housing.

and this is a big push from the Carney government. So how is it that we have a housing crisis and a surplus of units? How are those two things happening at the same time? Well, we have a surplus of condo units that a lot of people can't afford to even buy or even want to buy, even if they could afford it. And then there isn't affordable housing that people want to buy or can afford to buy. So a lot of people call it the missing middle. But it is a part of housing that. that's just not there. So a housing unit that's big enough for a family, big enough for a couple,

or bigger than a 500 square foot condo, there isn't that type of housing that's affordable. So yes, we have a surplus of homes that people don't want and a shortage of homes that people want. So did we just kind of build the wrong kind of housing? Yeah. Yeah. Yes. Yes. Why? Why? I mean, we've talked about this a little bit already, but why do we have so many more condos than other types of housing? Are there more incentives to build condos, that kind of thing? I think part of the reason why we have a surplus of units that people don't want is that for more than a decade, condo development was catering to investors. And investors care about the price and whether they can rent it

and whether the price of that unit will appreciate at some point. They care less about the size, the layout, the view, the location. So development was catered more to small investors. So if development was catered more to people who wanted to live in those homes, we would have seen a different type of housing built for sure. Oh, that's so interesting. So it's not really about who wants to live in these units. It's about who's going to buy these units. Another factor is how condo building is financed. And so for a developer to even get to the financing stage of their project, they have to sell a minimum of 70% of their buildings units. So in order to do that, you cater to who's going to buy those units right away. Who doesn't care about waiting a few years to get their home?

It's an investor. It's not someone who wants to move into their unit right away. So because of that requirement to meet the 70% of buildings units, you just got a lot of investors buying them and not people who would live in them. And then if we see a tank in demand from particularly new immigrants, international students,

that means that there are fewer people that want to rent these places. Yes, yes. If there's no demand, then no one wants to buy these units. Right. So there was a report last week from the CMHC

that Canada Mortgage and Housing Corporation that said we're expecting to see a downturn in home building. How significant of a downturn Are you expecting to see what did the report tell us? Yeah, the report said that home building, like the number of housing starts would decline this year compared to last year. It was going to drop by around 7%. And then in the following few years, home building would continue to drop.

I mean, it is pretty significant to see consecutive years of housing starts declining at a time when the Kearney government has said they want to double the rate of home building. So, yeah, it's significant. The reason for the forecast, CMHC said, was because there's a lot of uncertainty right now, economic uncertainty. We have a trade war with the U.S. There's a Middle East war with the price of oil going up. There's no demand from buyers. So there was a multitude of reasons they provided for the downturn. And one of them was, of course, that there's no demand for pre-construction condo units,

which is part of the reason why we're going to see a decline in housing starts. So was that 7% that was homes of all sorts or was that condos specifically? No, it's homes across the board. And I would say that also includes rental only, so an apartment building, for example. Okay. So what would a downturn mean for the housing supply? Like what would the ripple effects of that be? At some point, there could be a shortage of homes.

We already know there's a shortage of homes that people can afford and a shortage of homes that people want to live in. But at some point, if we open the immigration taps again, it means that there will be a shortage of homes. Let's keep going down the line of ripple effects. What does that mean for the market and for the situation that we're in right now for housing? Yeah. I mean, we could see potentially a return to, I don't know, 2020 or 2021 when there was an insatiable demand for housing and that drove up our rents and drove up the cost of purchasing a house. We'll be back in a minute.

Okay, I'd like to talk about what governments are trying to do about this issue around condos now. So there were some headlines recently about the federal government and the BC government buying up some unsold units in BC. What was going on there? Yeah, so the BC government and the federal government said that they would buy about 2,200 of these recently completed units that have not been sold. and they said they would buy these units and turn them into rentals, affordable rentals, and have a plan to, like a rent-to-own plan, so the renter could eventually become a homeowner. So these would be government-owned units that are then rented out as affordable units, that they can then kind of rent-to-own structure, and then it would be theirs.

Yes. That's the idea. And 2,200, out of you said it was about 4,000 of these units, That's a pretty big percentage that they're planning to buy up. Yeah. Yeah. Yeah, it's a very large percentage. I mean, it's over half of the unsold product in the Vancouver region.

Yeah. You had some details there. How are they planning on funding this project? What are the other details that we have about how this would work? So we know that the federal government said it would cost about $1.45 billion for this acquisition of these 2,200 units. and the federal government said they would provide about 150 million to help finance that, and then another 284 million from a different program. So roughly 30% of the cost of buying and converting these units would come from the federal government.

The rest is going to come from BC. We don't actually know how they're going to finance it because they haven't said. They're still working on the plan. Okay. What kind of response has this move gotten? How has it been received? It's been received very poorly. It's not being viewed very favorably by the general public.

The conservatives and the NDP have called it a bailout. The NDP has said that we're wasting valuable public resources to prop up developers. The conservatives have said that we're not allowing the free market to run its course and we're not letting the price of these unsold units to drive. Instead, the federal government and the BC government is putting a floor on pricing by saying they're going to buy these unsold units. And then even the developers in BC say they didn't even want this plan. They have said they wanted the province to do something that Ontario did, which was provide an HST rebate on new home purchases. They did not want these units to be bought outright.

So yeah, no one's happy with the plan. Wow. is the plan to buy these a market cost? Do we know that detail? So the federal and BC government have said that they would buy it below the market rates and they would buy them in bulk at a discount. We don't know how much of a discount. Right.

That's a detail we're still waiting for. That's a detail we're still waiting for. I should mention that the BC Premier has said that they probably would not buy in the city of Vancouver because it's too expensive and they would look outside because it's cheaper. Right. You said that there's been some criticism that it's a bailout for the developers. Is it a bailout? Yeah, I mean, if government is stepping in to buy something that no one wants, yes.

Yeah. Okay. And what are people worried about in it potentially being a bailout? Like, what's the concern that people have with this plan? The concern is that some developers will get favorable treatment. You're buying something, a product that no one wants. And so you're not allowing the price to follow. to where it could fall.

The other concern is that, well, when the market was going up and up, no one stopped developers from making profits. No one put a cap on that. So why do we have to put a floor when prices are going down? You mentioned what Ontario is doing, this HST, the Harmonized Sales Tax, rebate. Can you remind me what that is? Yeah. So Ontario and the Fed also came up with a plan to.

help the condo industry in the province. And their plan was to provide buyers with an HST rebate if they buy a new home. So that could be a new condo. It could be a new detached house. If an individual or an investor bought a new home, they would not have to pay HST in it. So that's the plan that Ontario came up with. And that's the plan that the BC development industry favors. How much money would be saved by doing this?

Like, how significant of a move would this be? It's a significant move. You save 13%. So it's significant. So, for example, on a home price out of a million dollars, you would save $130,000. It's a very, very big saving. It's a lot of money.

Yeah. And does this cost the government or the taxpayer money to do this? Yes, of course. Tell me, tell me. Yeah. Yes. So the federal government is providing taxpayer funds for their portion, the 5% GST, and Ontario is funding the rest of it. So this was launched in April. How has it been working? Is it working the way it was designed? It's it's working very well for detached houses, low-rise houses, townhomes, semi-attached houses. But not condos.

No, no, no. It's not working as well for condos. I mean, it's working. It is working somewhat for condos, but it's working much better for low-rise housing. Interesting. In fact, sales of new homes, like new low-rise homes that were above the 10-year average. So why isn't it working for condos? I think those people don't want to own them. We're back to the demand. Yeah.

There's no demand for condos. Yeah. Or a lot less demand for condos. Yeah. You wrote about large investors bulk buying condos. Can you tell me about that and how this connects to HST? Yeah, for sure. So if you are an investor and you want to buy one of these new homes and get the discount, you have to rent it out. So that's part of it. Like part of the deal or the requirement is you buy the unit and then you rent it. You can be a house or a condo. So these large investors are buying in bulk, so more than five, for example, but up to as many as 30 in one go. And they are able to negotiate. lower prices. So there's this one real estate company, Jesta, who has said that they want to spend,

you know, less than $800 per square foot on a unit. Okay. Is that, and how does that price compare to what we've been talking about? Is that below market? Yeah. So, okay, so the average asking price for a new condo is over $1,000 per square foot. So yeah, they want to get it at a pretty significant discount. Is that good for the market? Is that by the market? Is that by for the market? What's the sense around this bulk buying of these condos? Well, if you're a developer and you want to get rid of your units, it's maybe you're taking a bit of a loss, maybe you're breaking even, but at least you're getting rid of your units. Get them out the door.

Yeah, get them out the door. And this one investor that I've referenced, Jesta, they've said they are basically drinking from the fire hose. They said that they've been inundated with requests from developers trying to get rid of their condos. And they may be, one purchase quite quickly in either April or May and buying about 30 units in one building in downtown Toronto. Wow. So we've walked through a lot of problems that we're seeing in the condo market. Are we watching the death of the condo market right now?

I think condos are going to be very different or have the potential to be quite different in the future because right now there are no investors. There are very few investors that are individual investors that are interested in bonds. condos and they were responsible for buying these units for the past decade. So yeah, I mean, I don't think we're going to see, it's going to be difficult to see how developers go back to the way it was back in, you know, 2015, 2016 for sure. Yeah. So does it feel like this era of condos as a starter investment, a starter home, does it feel

like that's a bygone era? Is that over now? In some ways, yes. I mean, but if condo prices continue to drop, then it could be a starter home at some point. I mean, prices are coming down. And realtors will say that some of these prices are the lowest they've seen in years. So yeah, it could come back.

This is all so fascinating, Rachel. Thank you so much. Thanks for having me. That was Rachel Young Lye, the Globe's real estate reporter. That's it for today. I'm Rachel Leifie McLaughlin, in for Cheryl Sutherland. Today's episode was produced by Amber Ranssen. Our producers are Madeline White, Michal Stein, and me.

Our editor is David Crosby. Adrian Chung is our senior producer, and Angela Pachenza is our executive editor. Thanks so much for listening.