In recent years, condominiums in Canada have been central to the conversation about housing. As the need for more affordable housing grows, condos have often been seen as a critical part of the solution. However, 2024 has shown that the condo market, particularly in major cities like Toronto and Vancouver, has encountered significant struggles, raising questions about the future of new developments and housing availability in the country.
A Challenging Year for the Condo Market
The condo sector, once celebrated as the go-to solution for urban housing needs, has faced a dramatic downturn this year. With soaring interest rates, construction delays, and a shifting economic environment, the once-booming condo market has faltered. Experts agree that a combination of factors, such as rising borrowing costs and an oversaturation of supply, has created what many are calling a "perfect storm."
In the Greater Toronto Area (GTA), one of Canada's busiest condo markets, the year began on a particularly grim note. By January 2024, Canada had already experienced 10 interest rate hikes, which significantly impacted both the purchasing power of potential buyers and their sentiment. The new condo segment was hit especially hard, with more than 40 projects either delayed or put on hold. This number only continued to grow, reaching a staggering 76 by mid-year. The result? A market that’s quieter than ever, with fewer buyers and fewer new units coming to market.
According to Shaun Hildebrand, President of Urbanation, the situation in Toronto is dire. Condo resales have plummeted to their lowest levels since 2008, and the pre-sale market—largely driven by investors—has slowed to a crawl. “We’re on track for the slowest year in almost three decades,” Hildebrand notes, with fewer than 5,000 pre-sale condo transactions expected, a far cry from the 22,000 average sales seen in previous years.
Investor Exodus and the Pain of Pre-Sales
One of the most notable trends in 2024 is the significant pullback by investors, who were once integral to the pre-sale condo market. With interest rates rising and prices softening, many investors have simply walked away. As a result, construction projects are facing delays and cancellations, while those who are still holding on to their investments face escalating defaults and financial distress.
Real estate lawyer Mark Morris has been vocal about the challenges facing the new construction market. "People who bought condos in 2020 or 2021 are struggling to close," he says. "Defaults are up, and in certain areas, like ‘dog crate’ condos, prices have dropped significantly."
Builders are also feeling the strain. As construction costs rise and the market cools, many are unable to justify continuing new projects. This, combined with the growing financial burden imposed by municipalities in the form of development charges (DCs), means fewer new condo developments are being initiated. In Toronto, these charges were increased twice in 2024 alone, further discouraging construction.
A Coming Crisis?
The slowdown in condo development in Toronto is just one part of a larger, national issue. Across Canada, particularly in cities like Vancouver, the narrative has been largely the same. In Greater Vancouver and the Fraser Valley, the condo market has seen a consistent decline. By the end of 2024, presale transactions in the region are expected to fall 30% below the 10-year average, with fewer new projects being launched. This is a worrying trend for the housing market, especially as demand for condos continues to rise.
Garde MacDonald, Director of Advisory at MLA Canada, highlights the bleak outlook for the region: "Rents have been softening, prices have stayed flat, and the buyers who existed at the start of the year are largely the same buyers that exist today." With many investors pulling back due to changing government policies and growing bureaucracy, the future of condo construction is uncertain.
Looking Ahead: Fewer Units, Higher Prices?
The biggest concern for many in the industry is what the future holds for condo supply. Experts like Jared Menkes, Executive Vice President at Menkes, warn that the current slowdown in condo development will lead to a "crisis" in the coming years. "If we don’t start projects in 2025, there will be no new deliveries in 2028," he says, pointing out the lengthy timelines required for high-rise construction.
This supply shortage could lead to even higher prices for the condos that do come to market. With fewer new projects being initiated, there will be less inventory available, and that, in turn, could make affordability even more elusive for would-be buyers and renters.
The Bottom Line: A New Era for Condos?
The condo market’s struggles in 2024 have exposed deeper issues in Canada’s housing sector. The combination of rising interest rates, investor pullback, and municipal policy changes has created a perfect storm, stalling many new developments and pushing the market into a holding pattern.
The coming years could see a significant reduction in condo supply, particularly in major markets like Toronto and Vancouver. While this might lead to higher prices in the short term, it could also exacerbate the affordability crisis that many Canadians are already grappling with.
As the government and industry stakeholders work to address these challenges, it remains to be seen whether the condo market can recover or if it will continue its downward spiral. For now, the future of Canada’s condo market is uncertain, and all eyes are on the developers, investors, and policymakers who will ultimately shape its path forward.
