Government Urged to Act as New Home Sales Plummet in Toronto and Beyond

Canada’s housing market is grappling with a sharp decline in new home sales, most notably in the Greater Toronto Area (GTA). Recent figures from August 2025 show new sales plunging to levels not seen in decades, triggering alarm across the construction, mortgage, and real estate sectors. Industry leaders are warning that without swift government action, the downturn could undermine jobs, supply chains, and the country’s long-term housing supply targets.

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Data Snapshot: The August Collapse

The Building Industry and Land Development Association (BILD) reported that new home sales in the GTA fell to just 300 units in August 2025. This marks:

• A 42% decline compared to August 2024.
• An 81% drop compared to the 10-year average of 1,595 sales.

Breaking down the numbers:

• Condo & Apartment Sales: Only 118 units sold, down 59% year-over-year and 90% below the decade average.
• Single-Family Homes: 182 units sold, down 21% YoY and 59% below the long-term average.

With 22,245 new homes in active inventory, the GTA now has a record 20 months of supply — the highest seen in modern market tracking.

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Broader Market Context

The slowdown in Toronto is not isolated. Other markets like Ottawa, Vancouver, and Kitchener-Waterloo have also reported declining new build demand. Analysts say rising borrowing costs, economic uncertainty, and regulatory delays are dampening appetite for new purchases.

For buyers, pre-construction purchases come with risks: extended timelines, higher carrying costs, and uncertainty about where interest rates will be at completion. Many are waiting on the sidelines, choosing resale homes or delaying homeownership altogether.

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Risks of Inaction

The slump in new sales is more than just a housing market story — it has significant economic implications:

1. Construction Employment at Risk
   Thousands of jobs in construction, trades, and related industries depend on steady new build activity. With fewer projects moving forward, layoffs and workforce reductions could follow.
2. Housing Supply Gap
   Canada’s federal government has pledged to add 500,000 new homes annually to tackle affordability. With current sales slowing, builders may cut back on launches, jeopardizing this target.
3. Wider Economic Ripple
   Reduced building activity affects industries from lumber and cement to appliances and home furnishings, spreading the slowdown across the economy.
4. Market Imbalance
   If fewer homes are built now, the mismatch between supply and demand could worsen in the coming years, leading to renewed affordability crises even if rates stabilize.

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Industry Voices

Developers and builders are calling on governments at all levels to step in. Suggestions include:

• Faster Approvals: Cutting red tape in municipal planning and permitting.
• Incentives for Builders: Tax breaks, subsidies, or loan guarantees to encourage new developments.
• Infrastructure Support: Investments in transit, utilities, and schools to make new communities more viable.
• Policy Alignment: Synchronizing federal immigration targets with provincial housing policies to avoid supply-demand mismatches.

Industry groups stress that without clear signals of support, many projects could be shelved, exacerbating long-term shortages.

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Implications for Mortgage & Lending Sector

For mortgage brokers and lenders, the plummet in new home sales presents both challenges and opportunities:

• Lower Originations: Fewer pre-construction deals mean reduced mortgage demand in this segment.
• Shift to Resale Market: Brokers may focus more heavily on resale homes and refinances.
• New Financing Products: Lenders could introduce specialized products for delayed completions or extended construction timelines to reassure hesitant buyers.
• Investor Segment Impact: Pre-construction sales often attract investors; their withdrawal could change risk dynamics in lender portfolios.

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What Buyers Are Experiencing

For prospective homeowners, the decline in sales is tied directly to affordability pressures:

• Higher Stress Test Barriers: Buyers must qualify at rates well above current contracts, sidelining many.
• Carrying Cost Concerns: Rising condo fees, taxes, and insurance compound monthly obligations.
• Uncertainty Over Rates: Even with recent Bank of Canada cuts, many remain wary of long-term payment stability.

The emotional toll is evident: surveys suggest a growing number of Canadians feel homeownership is out of reach, particularly younger buyers in urban centres.

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Outlook for Policy and Market

The coming months will be critical. Policymakers face pressure to demonstrate they are serious about boosting housing supply. Potential measures under discussion include:

• Expanding first-time homebuyer assistance programs.
• Offering low-interest construction loans to developers.
• Adjusting zoning to allow higher-density projects.
• Introducing tax incentives for purpose-built rentals to ease pressure on ownership demand.

At the same time, market watchers are keeping a close eye on inflation data, interest rate announcements, and employment figures. Any improvement in affordability could stabilize sales, but without government intervention, the outlook remains bleak.

The collapse of new home sales in Toronto and beyond is a stark warning for Canada’s housing market. Without immediate action, the consequences could stretch from lost jobs in construction to worsening affordability for future generations. For mortgage professionals, the challenge will be to guide clients through this uncertain period while advocating for structural reforms.