The Pre-Construction Market is “Broken”
According to Myers, the current pre-construction condo market is as bad as anything Toronto has seen, comparable to the early 1990s recession. Developers are not launching projects because units are not selling. The core problem is simple, yet powerful.
There is a deep disconnect between:
- What developers need to change to make a project financially viable
- What buyers and investors are willing or able to pay
For nearly three decades, new condo prices in Toronto went up every single year. For 27 consecutive years, there was no reset. Low rates, cheap money, surging land values, higher development chargers, Covid-related construction inflation and fear of missing out all collided to create a bubble in 2021 and early 2022.
Prices for new condos are detached from resale values and from local incomes. At the peak, some projects were launching at 40 to 50 percent premiums over resale. Investors were effectively paying luxury pricing today for uncertain future value tomorrow. When interest rates rose, the model finally broke.
The Developer Math: Why Prices Cannot “Just Come Down.”
From the outside, buyers often assume that if pre-construction sales slow, developers will reduce prices until demand returns.
In reality, the cost stack on a downtown Toronto condo project is so heavy and so fixed that there is very little room to move. Land, construction, financing, marketing, HST, soft costs and government fees all layer on top of each other. In many projects, more than 30 percent of the final purchase price is allocated to various taxes and fees, from development charges to the double land transfer tax in Toronto.
Myers points out that in some American cities, government-related fees can amount to 6 or 7 percent of the cost of a new home. In Toronto, that number regularly reaches a third of the total. In other words, the “tax” portion of a million-dollar condo here can equal the full purchase price of a larger unit in markets like Dallas.
Even with land values down and construction costs off their peak, it is still not enough to make new projects pencil at prices that feel attractive compared to resale. That is why inventory is stuck, and launches are on hold.
Supply, Demand & the 2028 Cliff
On the one hand, there is constant talk of low-rise “housing shortages.” On the other hand, the ciy is delivering a record number of new apartment units. Myers notes that between condominiums and purpose-built rentals, the Toronto region has:
- 32,000 completions in 2023
- 31,000 completions in 2024
- Another near-record wave through 2025 and 2026, driven by projects sold during the boom years of 2018 to early 2022
His estimate of actual underlying demand is closer to 25,000 to 30,000 units per year, and likely at the lower end of that range. That means the market is currently oversupplying. The result is softer rents and flat or declining prices in the near term.
The real story begins in the back half of this decade. Because so few projects are launching today, very few will be completed in 4 to 6 years. Myers expects that by 2028, Toronto could deliver only half of the housing it actually needs, in the range of eight to twelve thousand apartment completions.
At that point, the dynamic flips:
- Rents will begin to rise again
- Prices will move up
- The lack of choice will be obvious to tenants and buyers
That is when politicians and the general public will start to feel the pain loudly, even if the development industry has been warning about it for years.
The End Of The “Golden Age” Of Condo Investing
For twenty years, Toronto’s small-scale investors quietly underwrote the city’s housing supply. They bought pre-construction units, provided the equity developers needed, and added thousands of rental suites to the market. That model is now under pressure. Many investors were never buying for cash flow. In many cases, units have not cash-flowed positively for a decade. They were buying for capital appreciation and using equity from previous properties to fund new purchases. With prices correcting, equity shrinking and carrying costs rising, that playbook no longer works.
Some investors have taken real losses in this cycle and may be permanently sidelined. Others need to see consistent price growth for at least six to nine months before they trust the market again. Myers believes Toronto may never again see 30,000 pre-construction sales in a year. He expects future launches to be smaller in scale: more 150-units projects and fewer 600-unit towers. The era of massive investor-fueled buildings may be behind us, at least for a long time.
This shift matters for anyone working with a luxury realtor in Toronto. The buyer profile in new buildings will change. The product will skew more boutique and more expensive. There will be fewer opportunities for the classic “buy three units in the same tower off a floor plan” strategy that defined the last decade.
Purpose Built Rentals, CMHC and Rent Control Risk
With condos on pause, many traditional condo developers are trying to pivot to purpose-built rentals. The federal CMHC programs have been a powerful incentive, offering favourable financing in exchange for building long-term rental housing and completing proper market studies.
However, purpose-built rental is capital-intensive and risky:
- Developers often need 30 to 35 percent equity for a rental building
- They cannot rely on presale deposits to fund construction
- Future rents and cap rates are uncertain, as it can take four years or more to complete a project
Overlaying all of that is political risk. Myers and Fox both raised the concern that future provincial or municipal governments could introduce stricter rent controls as inequality and housing affordability tensions grow.
Rent control that locks in rent increases, regardless of tenant turnover, devastated the new rental supply in Toronto for decades. It is not hard to imagine more aggressive versions of control returning over the next cycle. Purpose-built developers and pension funds know this is a risk, yet it is rarely discussed frankly in public.
The Shoebox Myth & The Reality Of Unit Sizes
One of the most common narratives in Toronto is that “greedy condo developers” have been forcing buyers into unlivable shoebox units. Myers’ data tells a different story.
Looking at hundreds of thousands of rental listings over several decades, he found that:
- The share of studios in new condo and rental buildings today is roughly the same, around eight percent.
- The average size of a recently built studio condo is about 448 square feet.
- The average size of a studio in purpose-built rental is about 443 square feet.
- Studios built in rental buildings between 1950 and 1979 averaged about 418 square feet and accounted for a higher share of total units than they do today.
In other words, small units are not new. They are a response to affordability and monthly payment, not a modern developer conspiracy.
Fox also notes that good design trumps raw square footage. A 500-square-foot suite with an innovative layout, high ceilings, generous windows, and minimal wasted space can be far more livable than a poorly designed 750-square-foot unit. The quality of the product, not just the size on paper, matters.
This is where an experienced Toronto realtor earns their keep. A skilled and knowledgeable professional realtor in Toronto knows which buildings actually live well, which floor plans function properly and which “square footage deals” are anything but.
Toronto’s Structural Challenges: Land, Lifestyle & Immigration
Behind all of this sits a bigger truth. Canada has a vast landmass, but very little of it is genuinely available or practical for development near jobs and infrastructure.
The country has:
- A limited number of number job-rich cities
- Greenbelt protections and “places to grow” policies that restrict sprawl
- Severe congestion that makes distant commutes less and less tolerable
Most Canadians still aspire to ground-related housing, yet policy and economics are pushing households vertically, often into smaller urban condos or mid-rise rentals.
At the same time, immigration policy overshot capacity in the post-pandemic period. While immigration is vital to Canada’s long-term success, short-term surges without matching housing, health care, and infrastructure create real strain and fuel negative sentiment.
Affordability is the thread running through all of this. A combined household income of 250,000 dollars used to feel aspirational. In today’s Toronto, a family at that income level can easily find itself renting for $5,000 or $6,000 a month and barely getting ahead.
The dream of home ownership is not dead, but it is changing. It requires better planning, more realistic expectations and expert guidance.
What Smart Buyers & Sellers Should Do Now
The next few years in Toronto real estate will not looking like the last twenty. There will be less speculation and more focus on fundamentals. That includes:
- Product quality over hype
- Neighbourhood and building selection over short-term price swings
- Cash flow realism and tax planning for investors
- Lifestyle alignment for end users who may be trading space for location
For buyers at the higher end of the market, this is an important window. A luxury product that is well located and well built tends to hold value through cycles. At times like this, there are opportunities to acquire best-in-class homes and condos at prices that would have been unthinkable a few years ago.
The Reset Ahead: What to Watch in Toronto’s Resale Market
The discussion with Myers reinforces a simple truth about the coming years in Toronto real estate. The resale market will be the first place where the consequences of today’s stalled launches, cost pressures and policy choices actually materialize. Prices will move differently depending on which neighbourhoods are absorbing record completions, which pockets are facing supply gaps and which buildings have product that still aligns with how people want to live.
Understanding those nuances will matter more than broad market headlines. As Myers underscored, the city is moving through a rare reset, shaped by affordability limits, structural supply cycles and shifting investor participation. The resale market will continue to reflect those forces long before the pre-construction sector recovers, and paying attention to the data at a granular level will be essential for anyone trying to make informed decisions in this period of transition.
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(*Source: Jan. 1, 2018 – Sept 1, 2025, RE Stats Inc. & Exclusive)
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This article was written by Ralph Fox, Broker of Record and Managing Partner here at Fox Marin Associates. Ralph is a Torontonian native who recognized from an early age that the most successful people in life apply long-term thinking to their investments, relationships, and life goals. It’s this philosophy, along with his lifelong entrepreneurial drive and exceptional business instincts, that help to establish Ralph as a top agent in the real estate market in downtown Toronto.
