After much speculation as to whether the Toronto real estate market will be able to absorb the sea of condos that have popped up, it seems that—at least for now—the answer is no. 

Between unsold new development, assignment and resale inventory, condo supply in the Greater Toronto Area is stratospheric. Listings are way up. Toronto’s condo market has been in a slump for a while now. There’s confusion and anxiety in the sector along with historic levels of backlog, being blamed on everything from developers getting carried away to borrowing costs and tightening market conditions. Whatever the causes, many Realtors maintain that their condo listings are barely getting showings. Investors and end users are terrified and gun-shy.

GTA currently sitting on an “unprecedented” supply of condo units

The condo market “is facing its toughest challenge in decades,” says Shaun Hildebrand, president of the real estate consulting firm Urbanation. “Investors are inactive and end-user buyers currently have plenty of lower-priced options to choose from in the resale market. It may take a while, but conditions will gradually improve as developers hold back supply, construction inventory continues to drop, and demand rises with declining interest rates.”     

According to Hildebrand, condo supply in Toronto is currently at least three to five times the norm, with a combined total of nearly 40,000 condo units in limbo across all categories. He’s been quoted stating that this is an unprecedented backlog—a level “the market has never seen” which could take years to absorb. 

Condo sales down 80% annually

New condo sales in the GTA have plummeted by over 80 per cent from last year and are at a 30-year low, according to Urbanation’s 2024 third-quarter report.

“Approximately 50 per cent of existing GTA condos are owned by investors, but at current mortgage rates and rental yields, it’s hard to make the cash flow economics work, resulting in many investor owners looking to sell, and likely further slippage of prices,” states Benjy Katchen, CEO of Wahi, a digital real estate platform.

With the hope that sales improve in the coming months, there’s much expectation focused on the spring 2025 market. A number of recent reports contend that the market is already showing signs of rebounding.

“We’re starting to see demand picking up but there’s still lots of inventory and prices are still up,” says Jason Mercer, chief market analyst for the Toronto Regional Real Estate Board (TRREB). “Sellers may be reticent to drop their price if they can hold on, knowing more buyers are probably soon coming on board.” 

Rate cuts will bring buyers off the sidelines

October showed a promising uptick in transactions in some market sectors. But people “need to see interest rates come down even further,” Mercer believes. “As interest rates drop off, a lot of inventory will be absorbed.” 

He expects we’ll continue to see rate cuts. “A lot of people would have purchased in the last year but they’ve been waiting.  There’s pent-up demand.”

The abundantly-supplied condo market means there’s choice and greater affordability for buyers, who are now in the driver’s seat with the luxury of shopping around until they find exactly what they want. But the picture is anything but rosy for sellers.

Navigating the market as a Realtor

How can Realtors navigate this oddball market?

First and foremost, make sure that the unit being sold looks its best and is priced right. Many sellers are still looking for a higher price point, but the reality is they’re unlikely to get it.

“If the majority of sellers would drop their price 5 per cent, we’d see a lot more happening,” asserts ReMax Hallmark’s Christopher Bibby, one of Toronto’s top condo agents. 

Agents should be pulling out all the stops, says Bibby. “When things go wrong it’s because agents over-promise and under-deliver. You’ve got to stand out. The days of just putting a unit on MLS and social media are over…I’ll be there at showings, or go in advance to make sure the lights are on and the place is perfect.”

Better value in the resale market

For investors, pre-construction currently isn’t the way to go, he advises. “There’s better value in the resale market than in new construction right now.”

He and other Realtors also caution that demand in the micro condo market has cooled. Previously beloved by investors due to affordability, these units – sometimes as itty-bitty as 300 square feet – are now among the hardest-hit segments of the market. There’s been talk in the media that down the road this may point developers in a new direction, pivoting to larger units and giving more consideration to lifestyle needs. 

Such elements also factor into Bibby’s advice to clients to “get away from density.” The reason? If you purchase a unit in a downtown tower, “you can’t differentiate yourself,” in Bibby’s opinion. A little outside the core though, in distinctive Toronto neighbourhoods like the Distillery District; Corktown; the Junction; Queen Street West; and Little Italy, there tend to be more low and mid-rise buildings with unique characteristics, he notes.

“It’s a great time to be looking to buy. It’s not a great time to list and sell,” he adds. “We’re seeing more end users, people buying condos to live in.” 

End-user buyers choosing non-tenanted properties

Nasma Ali, a team leader with cloud brokerage Real Broker, says this can be a problematic mix. She explains: “Investors will take a condo with a tenant, where others won’t.” Tenanted properties are hard to sell in this market, so end-user buyers “will choose non-tenanted properties now that they have the pick of the litter.”

Having their choice of units also means that—where previously buyers were up against bidding wars and may only have been able to find affordable condos in the suburbs—now they’re more likely to wind up with the features and location they really want.

“Before, they’d have to go to Mississauga. Now they can get a condo in Toronto,” says Ali.

Good news for buyers, not for sellers. 

Sellers are bleeding money “but not hemorrhaging”

“I tell people that if they can hold on, do it. This is not a normal market,” Ali states. “If they can’t, there are strategies to be able to sell the unit with time – if their price undercuts everyone in the building, even if just by a bit, or if they get the tenant out, do cash for keys…”      

Sellers are bleeding money “but not hemorrhaging,” she finds. “Explain the situation, look in particular at what’s happening in the other units in the building, and provide regular updates.” 

Clients have grown more accepting of current market realities, making it easier to reason with them, in her observation. 

“I tell sellers, ‘It’s not your unit. It’s the market,’” she explains. “There are not enough buyers out there to absorb all the condos. That’s all it is.”