A deflating, bubble-like Toronto condo market spells more bad news for investors and developers as prices for unsold units are projected to continue to slide in 2025, according to data from Bullpen Research & Consulting.

Research by the Toronto-based firm found the average asking price per square foot for a new, unsold condo fell to $1,524 in Q4 2024, a 10 per cent decline from a three-year peak of $1,689 in Q3 2022. The trend is expected to continue in 2025, with Bullpen predicting a 7.3 per cent decrease to $1,425 in the City of Toronto, and 6.1 per cent decline to $1,055 in the Greater Toronto Area (GTA) suburbs.

Newly built condos that have to keep pace with the resale market are driving the decline, Ben Myers, founder and president of Bullpen, told RENX Homes. Additionally, the big costs gap to deliver a new condo means investors are not seeing a path to profitability, resetting the market.

Though buyers may be happy, “It’s never good for the development industry to see pricing going down, because that just makes everyone nervous,” Myers said. “It makes lenders nervous, it makes equity people nervous.

"It’s obviously not good for launching projects and getting investors to buy.”

He foresees a “fundamental issue” for developers in 2025 and 2026. That's when investors and other condo buyers who purchased development units at peak prices have to close the transaction in a very different market. Some could face significant financing challenges - so developers may be forced to be creative or turn to major adjustments to close on these sales.

The end of the condo frenzy for developers, investors

The end of the real estate investor “frenzy” fuelled by the COVID pandemic meant “people really figured out that the resale market wasn’t coming back as quickly as they might have anticipated.”

Developers are left in a bind from the reset, forced to compete with the prices of resale units that are dropping to 2020 or 2021 levels, Myers said.

Data from Zonda Urban says condo developments which would have delivered 2,345 housing units were cancelled from January to September 2024, and 6,849 additional units are in vulnerable projects in the Greater Toronto and Golden Horseshoe Area.

Urbanation put the number of unsold new condo units in development in Q3 2024 at 23,918, a 4.4 per cent decrease from the previous quarter but a 16 per cent increase from the year prior.

Investors too are fighting unfavourable winds. Investors own a significant portion of the Toronto condo market, but if they are not seeing units priced at or below resale value, Myers said they will wait for better conditions rather than struggle to make a profit.

Some condo developers have already made moves such as converting their projects to rental housing - and more are likely to follow.

The impact may already be resonating. New condo sales in the Greater Toronto Area, Bullpen data says, plummeted in 2024 to 4,800, a fraction of the 12,633 in 2023, 20,168 in 2022 and 29,626 in 2021.

CIBC and Urbanation concluded the city’s condo market is teetering on “recessionary territory” in the summer of 2024, with over three-fourths of investors losing money on mortgages for new condo units.

Myers said some developers do not have the room for more pricing declines and are going to “have to hold on as long as they can.”

Though decreasing interest rates should put a floor on pricing, Myers said there is a long way to go until that bottom is hit.

What condo developers and investors need 

He predicts an uptick in new condo sales in 2025 — from 4,800 in 2024 to 6,300 — because of larger project completions. As developers lower prices, combined with further rate cuts from the Bank of Canada, Myers said he expects a spike in activity and more launches from big developers with strong financial resources as they look ahead to a recovery.

The conditions for a market recovery would come from borrowing costs decreasing, Myers suggested. A pause on the proposed capital gains tax also helps.

Pricing of new condos also must be more in line with the resale market: “Costs have to come down or the resale or rental market needs to come up.” But such a scenario requires declines in condo construction costs and government development fees.

A more hospitable market for new developments would probably arise from sales from experienced developers starting the momentum, Myers said.

A market rebound will need completions to go “way down” to drive up resale and rental values. Myers expects this could start in the second half of 2026 to early 2027. A lack of condo starts in 2023 will impact what comes onto the market at that time, he added, so a major undersupply will drive unit prices back up, he forecasts.