A fix to revive slumping new condo sales will be tricky to execute in current market conditions. It’s a matter of the right product at the right price, advises Peter Norman, vice president and economic strategist with Altus Group, and neither is easy to come by in the former investment hotbeds of Toronto and Vancouver.

“The model whereby a lot of sales go to investors — which ultimately get flipped over to end-users — has kind of hit the skids right now because investors don’t see potential value coming through that model,” he observed during the commercial real estate advisory firm’s recent online overview of 2025 market conditions. “I think we’re going to have a lot of challenges through 2026, at least in Toronto and Vancouver.”

Sales of new homes in the Greater Toronto Area, both condo apartment and single-family, have plummeted by about 90 per cent from the 2022 peak. As investors vanish, the preponderance of small units in new condo inventory is increasingly out of sync with what prospective purchasers are seeking.

Meanwhile, developers focused on high-rise projects that take years to deliver to the market have suffered a sustained run of bad timing that’s brought soaring construction costs, escalating interest rates, diminished land values and, now, faltering consumer demand. In 2024, nearly $598 million in residential lands sales in the Greater Toronto Area were due to financially stressed vendors, while Greater Vancouver saw nearly $319 million worth of similar transactions.

Joining Norman for the online presentation, Ray Wong, Altus Group’s vice president of research and data analysis, noted that many defaulters borrowed to purchase land that has since lost value, got hit with higher costs on refinancing and couldn’t hold on long enough to complete projects, close unit sales and garner payment. Others lost skittish investors or “failed to pivot” in the blast of volatile market forces.

“We’ve had quite a few distressed transactions over the last 18 to 24 months, and this will likely continue going into next year,” Wong projected.

Solvent investors appear to either be scooping up big bargains or simply not buying. Altus reports transaction values are down from last year’s levels for all asset types except hotels, but the steepest decline is the 47 per cent drop in residential land. As of Sept. 30, 2025, $4.7 billion worth of deals had been recorded, compared to $8.9 billion in sales over the first three quarters of 2024.

Builders voice pessimism

The larger share of developers who will hold on to complete their in-progress projects are nevertheless struggling to eek out a profit and remain competitive. The Canadian Home Builders’ Association (CHBA) pegs the sector’s outlook on multifamily market conditions at 16.8 on a scale of 100 in its newly released Q3 2025 housing market index. The record-low rating has dipped since hovering around 22 throughout 2024, and plunged from the 87-to-89 range in late 2021 and early 2022.

Just 4 per cent of CHBA’s nationwide panel of regularly surveyed industry insiders characterize current selling conditions as “good” and just 7 per cent expect they’ll be good in the next six months, while 68 per cent call current selling conditions “poor” and 61 per cent do not expect that status will improve over the next two quarters. The vast majority (80 per cent) report traffic from prospective buyers has been low or very low, while 3 per cent say they have seen a high or a very high level of interest.

“The resale market has had a big price adjustment and is certainly picking up. On the new construction side, one of the challenges is that the product is still priced above the market,” Norman maintained.

He suggests builders in markets outside Toronto and Vancouver, where lower land costs make mid-rise developments and larger units more feasible, may have more leeway to close the gap. There will be continuing new housing demand, even with recent immigration policy adjustments expected to dramatically slow the pace of population growth, including pent-up demand that improved affordability could unleash.

“I think the market is going to come back when we have the right kind of product to appeal to end-buyers. Initially, that will tend to be smaller projects with larger units that can be delivered to the market more quickly,” Norman hypothesized. “Once we see a regular price coming forward that’s more like $700 to $800 per square foot, as opposed to $1,100, that may be something that stimulates the market a little bit.”

Thus far in 2025, Altus figures show that Vancouver’s new condo sales have dropped 61 per cent from last year’s rate, while Toronto has experienced an even sharper 64 per cent decline. Year-over-year sales are also down 65 per cent in Calgary and 16 per cent in Montreal. Edmonton is the outlier with a 9 per cent increase in condo unit sales, in contrast to the 21 per cent decrease in single-family home sales in that market.

Future lags and prospects

That’s not expected to fully flow through to construction employment and the development supply chain until later this decade. New housing (single-family and apartment) starts have dropped off to a greater degree in the GTA, but are expected to be largely on par with 2024 — surpassing 250,000 units — nationally.

“The starts that are happening this year are sales that took place in the frothy period of 2022-2023. They’re still getting going in many markets,” Norman said. “The decline in sales is not going to be fully reflected yet. That will come ahead, but we’re still seeing a relatively robust housing environment, at least for the next couple of quarters.”

Canada-wide, multifamily construction starts are steadily shifting to purpose-built rental projects, which account for about 70 per cent of development that has broken ground to date in 2025. Investors also continue to favour existing rental apartment buildings. Multifamily residential in suburban Vancouver emerged as the top choice among 30 possible combinations of asset types and markets in Altus Group’s Q3 2025 survey of 400+ clients’ attitudes toward investment.

Norman warns that slower population growth is going to eat into the 20-to-35-year-old demographic of apartment dwellers, but points to a source of potential renters that could be tapped.

“Whether or not there’s going to be an excess supply of really small units depends on how quickly the pricing of that supply unleashes a lot of the pent-up demand,” he mused. “We may not have a lot of net growth of people in the ages of 20 to 35 in the next 10 years, but those of them who are living in their parents’ houses right now is where a lot of our demand is going to come from, if an adjusted rent can incentivize them to move out of those houses.”