Toronto’s once-booming condo market has been deteriorating over the past year, echoing the condo crash of the 1990s. However, a new report from Canada and Mortgage Housing Corporation suggests a less severe outcome this time around.

Although both periods experienced soaring home prices and strong investor interest, and then struggled under the weight of rising interest rates, there are major differences that stand out. Unlike 30 years ago, a lack of supply and a more diverse and stable economy define today’s market.

In 2020 and 2021, real home prices in the Toronto CMA averaged annual growth of 13 per cent, while they doubled in just four years by 1989. After the Bank of Canada hiked interest rates to curb inflation in the 1990s, a significant two-year recession followed, however, economists are forecasting a more mild recession now, with modest impacts on the housing market.

According to CMHC, the latest episode of inflation between 2021 and 2022 may have slowed the economy but it wasn’t enough to trigger a recession. Trade tensions have recently added economic uncertainty and exposed a few weak spots, but overall, employment has remained steady and rising incomes continue to support consumer spending and debt obligations.

In contrast, the downturn in the 1990s hit sectors sensitive to interest rate changes, limited fiscal spending, and sparked the sharpest job losses since the Great Depression. Even after the recession eased up, Toronto grappled with sluggish private-sector job growth, technological disruptions and industry shifts fueled by free-trade policies.

A landscape of scare supply

The condo market today also differs quite a bit due to a structural housing shortage. This suggests that existing units will be gradually absorbed as the market rebounds. Back then, the issue was the opposite: more speculative overbuilding led to serious oversupply.

At the same time, strong demand in the rental market drove record-breaking lease signings for condos apartments in the first half of 2025. As the condo market softens, more developers are shifting gears—converting projects and unsold units into rentals.

As well, competition from new single-detached or row homes remains fairly limited, unlike the oversupply seen in this segment during the 1990s. This is reinforced by improved health among seniors, which has encouraged more to age in place. CMHC data from 2023 found that the share of elderly households who sell their property is elevated only in the most senior cohorts, and it will be a few years before we see a big surge in listings from this group.

A key highlight of this report is the expectation that, after a period of adjustment, growth is expected to return. CMHC Chief Economist Mathieu Laberge says Toronto’s condo market is no stranger to ups and downs; it can change quickly and is sensitive to both financial conditions and buyer sentiment.

“We understand that many households are finding it increasingly difficult to navigate today’s housing market, with affordability challenges and uncertainty creating real stress for buyers and renters alike,” he said. “Looking ahead, we expect the market to gradually regain momentum due to a persistent lack of supply in the GTA, greater economic diversity and stability compared to the 1990s, and stricter lending rules for both developers and buyers.

“Apartment housing starts in Toronto CMA have declined sharply, which is expected to result in housing completions tapering off after 2026. Combined with pent-up demand and expected economic growth over the next few years, this could amplify concerns about a lack of housing supply.”

Stronger lending standards

The 1990s crash and the 2008 U.S. sub-prime mortgage crisis led to tougher lending policies in today’s condo market.

Banks now require more than 70 per cent of units to be sold before construction can begin; whereas in the past, speculative builders used to bet on soaring prices and more relaxed pre-sale rules (roughly 50 per cent) to build and sell quickly.

A 2016 CMHC analysis shows developers usually sell 80 per cent of units when construction begins. More recent data aligns with this trend: in Q2 2025, completed projects saw more than 90 per cent of units absorbed.

Mortgage underwriting has also evolved, with buyers being stress-tested to withstand higher mortgage rates. This added prudence is reflected in today’s low mortgage arrears (0.23 per cent as of Q1 2025), which remain significantly below levels seen during the 1990s downturn—a period when arrears rose rapidly and were about three times higher than today, peaking at 0.68 per cent in Q1 1992.

The full CMHC analysis, “Is Toronto’s condo market downturn a repeat of the 1990s?”, can be found here.