Toronto condo market is deep in a reset that invites comparisons to the city’s early-1990s bust, with falling sales, swelling inventories, and nervous investors.
Canada Mortgage and Housing Corp. says some surface similarities are real, including the pace of inflation-adjusted price declines.
The agency argues the backdrop is different this time, citing stricter underwriting, higher pre-sale thresholds, and an overall shortage of housing that should eventually absorb excess supply.
In a September 24 analysis, CMHC said today’s condo pipeline is largely spoken for before shovels hit the ground, a contrast with the speculative building that set up the early-90s pullback.
Developers typically need to sell about 70% of units to secure construction loans, and projects that proceed are usually around 80% sold, with completed buildings above 90% absorbed.
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Mortgage arrears remain low at 0.23% as of the first quarter, compared with a 0.68% peak in 1992.
In a September 9 news release, CMHC said Toronto is on track for its lowest homebuilding pace per capita since 1996, driven by a roughly 60% plunge in condominium starts in the first half of 2025.
The agency linked the slowdown to a pullback in investor demand, which has reduced project feasibility and led to cancellations and delays.
Tania Bourassa-Ochoa, deputy chief economist at CMHC, said in the release: “The ongoing construction slowdown in the homeownership market poses risks to future housing supply, workforce retention, and affordability.”
CMHC estimates condo sales across resale, new and pre-construction segments have fallen sharply since mid-2022, and the stock of unsold pre-construction units has surged.
It would now take close to five years to clear Toronto’s pre-construction inventory at current sales rates, up from barely two months in early 2022.
Urbanation reported that only 502 new-condo sales were recorded across the Greater Toronto and Hamilton Area in the second quarter, a 30-year low and roughly 91% below the 10-year average for a spring quarter, as completed inventory climbed to record levels.
Developers have responded by slowing launches and, in some cases, converting projects or unsold units to rentals.
Policy and macro forces are working in the background, inflation has cooled from last year’s peaks, and the 2 percent inflation goal remains the Bank of Canada’s compass.
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Government incentives have steered more building toward purpose-built rentals, but CMHC warns that the sharp drop in condo starts could store up affordability problems once demand rebounds.
Why this is not a 1990s rerun, according to CMHC
CMHC’s comparison highlights key differences: the city’s economy is more diversified than it was three decades ago, stress-tested mortgage rules have curbed speculative excess, and much of the new condo pipeline is pre-sold rather than built on spec.
The agency also sees a structural shortage of housing rather than an overbuild, which should help clear the backlog as conditions normalize.
Ottawa’s attempts to stimulate supply, such as tax changes and expedited approvals for rentals, may not quickly relieve pressure in the condo segment.
Internally, grim outlook for Canada’s housing crisis assessments have already noted the risk that today’s slowdown could morph into tomorrow’s shortage.
CMHC’s bottom line is that while the charts rhyme with the early 1990s, the market architecture has changed.
That does not guarantee a painless landing, especially if investor selling accelerates or financing conditions tighten again.
It does mean the path forward likely looks less like a crash and more like a long, uneven thaw.
