Toronto was the “epicentre of weakness” for residential construction in the first half of the year as condo construction slowed and a glut of resale listings discouraged new projects, a new report from Canada’s national housing agency reveals.
The Canada Mortgage and Housing Corporation’s fall housing supply report pointed to a stark divide with Calgary, Edmonton, Montréal, Ottawa and Halifax building homes “at record or near-record pace” and costlier markets in Toronto and Vancouver languishing well behind.
In fact, the report said that Toronto is now on pace for its lowest annual housing starts total in 30 years.
“A pullback in investor demand during the first half of 2025 reduced project feasibility, leading to cancellations, delays, and a sharp drop in construction,” the report states. “Many in the building community suggest construction costs and development charges must be reduced to ease condominium prices and improve project viability.”
Condo challenges compound
Toronto has seen the sales of new homes plummet in recent months, with one report released over the summer suggesting that the decline is quickly “eclipsing the 1990s downturn.”
New home construction, meanwhile, has also sagged in lockstep.
The report from CMHC found that condominium construction was hit especially hard in Toronto, with a 60 per cent drop in new builds and developers struggling to secure the necessary financing to start new projects amid pre-construction sale challenges.
The report warned that low “pre-construction sales have reduced starts by causing fewer project launches and more cancellations.”
Instead, the condo resale market has been taking off, reaching a record high in the second quarter of the year. CMHC asserts that potential condo buyers were turned off by “economic uncertainty” and that instead, many buyers “turned to the resale market that offered a vast supply of units that were lower priced, larger and potentially more suitable to their needs (on average).”
The condo market slowed across the country, with the only exceptions being in Edmonton and Ottawa.
“Only a marginal recovery is expected in 2026 and 2027, keeping construction activity well below historical levels,” in Toronto CMHC warned.
Rental options more stable
In the report, CMHC said that homebuilding activity on Toronto fell to its lowest point since 1996 on a per capita basis in the first half of the year.
CMHC suggests that “optimism among developers” in the Toronto region’s long-term rental market protected rentals from the decline condo construction is seeing. Rental prices are still “well above their 10-year average,” only falling by eight per cent in the first half of the year.
Following this trend, some condo developers felt they saw an opportunity in rentals and changed their tune. Urbanation reports nine projects being converted to rentals since 2024.
The decline is more gradual but rents across the GTA have been dropping, according to a combined report from Urbanation and Rentals.ca. Ontario saw one-bedroom apartment rent drop by more than five per cent and two-bedrooms by three-and-a-half per cent over the last year.
Affordability continues to be a concern for GTA
CMHC expects that new housing will not meet levels required to return affordability to pre pandemic levels. Their report warns that the lack of construction will hurt the GTA’s overall economic activity potentially leading to “outmigration, a higher incidence of homelessness and forgone tax revenue.”
