A new report from the Canada Mortgage and Housing Corporation (CMHC) reveals a major downturn in the condo markets of Toronto and Vancouver, following years of rapid growth. Since mid-2022, sales of new, resale, and pre-construction condos have plummeted, driven largely by higher interest rates and shrinking investor appetite. By early 2025, condo sales in Toronto had dropped 75%, while Vancouver saw a 37% decline compared to the peak in 2022.

Despite the slowdown, developers have continued building, flooding the market with new supply. In 2024, a record 25,572 condo units were completed in Toronto and 12,442 in Vancouver. This has led to a severe oversupply, especially in Toronto, where it would now take nearly five years to sell the current inventory at the current pace. As a result, prices have come under pressure—falling 13.4% in Toronto and 2.7% in Vancouver since 2022.

Investors, who once drove much of the demand, are now feeling the squeeze. Higher mortgage costs, stagnant price growth, and tighter financing conditions have significantly eroded returns. In Toronto, investors who bought pre-construction units in 2024 could face capital losses of up to 6% by the time their units are ready. At the same time, the cost of carrying investment properties has risen faster than rental income—up 24% in Toronto and 29% in Vancouver—further reducing profitability.

In response to these market challenges, project cancellations have surged. Over half of Toronto’s pre-construction condos remained unsold in Q1 2025, leading to a fivefold increase in cancellations since 2022. Lenders, reluctant to finance projects without strong pre-sales, have pushed developers to pivot toward rental housing instead.

While the current glut has temporarily eased housing costs for buyers and renters, CMHC warns this relief may be short-lived. With fewer projects being built today, the pipeline of future housing is shrinking—setting the stage for renewed shortages down the line.