Why today's weak condo sales could set up tomorrow's housing shortage

By Sam Kamra | Sales Representative, Re/Max Millennium Real Estate | Founder, Listing.ca

Toronto has spent years talking about the same problem: we need more housing. Yet there is an interesting contradiction developing in the Toronto real estate market. Condo sales have weakened, prices have come under pressure, investors are more cautious, and developers are finding it increasingly difficult to make new condominium projects financially viable.

For buyers frustrated by Toronto housing prices, that may sound like progress. More inventory, lower prices and fewer bidding wars should improve affordability in the short term. But there is another side to this story that we may not fully appreciate until several years from now. The condominium buildings Toronto will need in 2030 and 2031 need to be planned, financed and built today. When buyers stop buying, developers stop building. Five years later, everyone asks why Toronto has a housing shortage. Real estate cycles have a funny way of repeating themselves.

Toronto Condo Sales Are Weak — But That's Only Half the Story

The Toronto condo market has changed dramatically from the conditions we saw during the pandemic-era real estate boom. Buyers have become more selective, investors are running the numbers more carefully, and there is considerably less urgency to purchase pre-construction simply because someone believes prices will be higher by the time the building is completed.

According to TRREB's second-quarter 2026 condominium report, GTA condo apartment sales improved from the exceptionally weak levels recorded a year earlier, but prices remained under pressure. The average GTA condo selling price was approximately $635,000, down 7.5% year-over-year.

That tells us what is happening today. What interests me more is what is happening to the housing Toronto is supposed to receive tomorrow. CMHC has reported that Toronto housing starts fell in 2025 to their lowest level since 2009, while condominium project cancellations have removed thousands of potential future units from the development pipeline.

Toronto can have too many condos available today while simultaneously creating the conditions for a housing shortage tomorrow.

Why Toronto Developers Are Pulling Back

There is sometimes an assumption that developers can continue constructing condominium towers regardless of what happens in the resale or pre-construction market. Unfortunately, buildings don't get built with positive thinking and government housing targets.

Large developments require enormous amounts of capital. Developers need to acquire land, obtain approvals, hire architects and engineers, pay consultants and development charges, arrange construction financing and eventually build the project. Pre-construction sales are particularly important because lenders generally require developers to achieve certain sales thresholds before advancing construction financing.

If investors and end users aren't buying enough units, those thresholds become much harder to reach. No sales means financing becomes difficult. No financing means construction doesn't start. And no construction today means fewer completed condos several years from now. CMHC has identified weak presales, investor pullback and high development costs as challenges affecting new projects.

Why Toronto Real Estate Investors Stopped Buying Pre-Construction

Toronto's condominium development model has relied heavily on investors for years. Investors purchased units during pre-construction, helping developers obtain financing, and many of those units eventually entered Toronto's rental market.

That system worked particularly well when investors believed rising property values would compensate for weak cash flow. Then the mathematics changed. An investor buying an expensive Toronto condo today has to consider mortgage payments, condominium fees, property taxes, insurance and maintenance. If the rent doesn't cover those expenses, the investor could be losing hundreds or even thousands of dollars every month.

Negative cash flow becomes much harder to justify when property values are also declining. Eventually investors ask a reasonable question: Why am I doing this?

Investors didn't suddenly wake up and decide they hated Toronto condos. For many of them, the numbers simply stopped making sense.

Today's Toronto Condo Correction Could Create Tomorrow's Supply Problem

This is where real estate cycles become important. Imagine weak Toronto condo demand continues through 2026 and into 2027. Developers postpone projects, some developments are cancelled, fewer new projects launch and construction starts decline.

Eventually the market changes. Prices adjust, interest rates change, population growth continues, rents improve or condos simply become inexpensive enough that buyers and investors return. Demand starts recovering, but there is a problem: developers can't press a button and suddenly produce 20,000 new condos.

A major Toronto condominium development can take years to move through planning, approvals, presales, financing, construction and occupancy. CMHC has similarly warned that because housing development takes years, today's slowdown in construction can contribute to future supply constraints.

By the time everyone realizes Toronto needs more condos, the buildings we need may already be several years away.

Toronto Is Building More Rentals and Fewer Condos

Another major shift is happening underneath the headlines. For the first time this century, purpose-built rental housing starts exceeded condominium starts in the City of Toronto, according to CMHC.

From a housing-supply perspective, building rental apartments is certainly better than building nothing. But it raises another question: what happens to homeownership opportunities if Toronto increasingly builds housing designed to be rented rather than owned?

For decades, condominiums have provided one of the primary entry points into Toronto homeownership. A buyer who couldn't afford a $1.5-million detached house might still have been able to purchase a condominium. If substantially fewer ownership units are constructed, Toronto may continue adding housing while simultaneously making ownership opportunities scarcer.

Toronto Real Estate Cycles Keep Repeating

One thing I've learned from more than a decade working in Toronto real estate is that people naturally assume today's market will continue forever. When prices are soaring, everyone believes they'll keep soaring. Investors buy, developers launch projects and construction accelerates.

Eventually affordability deteriorates or economic conditions change. Sales slow, prices decline, investors disappear, developers cancel projects and construction slows. Then existing inventory gets absorbed, demand eventually returns, and suddenly everyone discovers there isn't enough new housing coming. Developers start building again, and around we go.

Apparently, real estate has a very short memory.

Does This Mean Toronto Condo Prices Are About to Recover?

No. A potential future supply problem doesn't automatically mean today's Toronto condo market has reached the bottom. Those are two completely different issues.

The condo market may still need time to work through existing inventory, affordability challenges and weak investor demand. Prices need to make sense relative to incomes, rents need to make sense relative to carrying costs, developers need projects that can actually be financed, and buyers need confidence that purchasing makes financial sense.

Corrections are a normal part of real estate. The more important long-term question is what today's correction does to tomorrow's housing supply.

What Sam Kamra Is Watching in the Toronto Real Estate Market

As a Toronto real estate professional, I'm watching more than monthly average prices. I'm watching condominium project cancellations, construction starts, pre-construction sales, investor demand, rental economics and the growing shift toward purpose-built rental housing.

Those indicators could tell us more about Toronto real estate in 2030 than today's average selling price.

Toronto may have plenty of condos available for sale today, but that doesn't mean we'll have enough housing tomorrow. If developers spend several years cancelling or postponing projects because buyers aren't buying, we shouldn't be surprised when the market eventually turns and there isn't enough new inventory coming.

Five years from now, Toronto may once again ask: Why didn't we build enough housing?

The answer could be surprisingly simple.

Because when nobody wanted to buy it, nobody wanted to build it either.

I have spent more than 12 years working in Toronto and GTA real estate, and one thing I've learned is that markets rarely move in straight lines. I'll continue covering Toronto real estate, condo prices, housing supply, mortgages and investment trends here on SamKamra.net and across my YouTube, Instagram and LinkedIn channels.

Sam Kamra is a Toronto real estate Sales Representative with Re/Max Millennium Real Estate, and founder of Listing.ca, covering Toronto real estate, condo prices, housing supply and mortgage trends.