GTA Condo Downturn “Less Severe” Than Early 1990s, Says CMHC

The Greater Toronto Area’s condominium sector is under pressure, but Canada Mortgage and Housing Corporation (CMHC) insists the turbulence will not match the brutal crash of the early 1990s. In a fresh report, the agency highlighted that while demand has slowed sharply, today’s structural environment offers important safeguards against a deep collapse.

Pre-Construction Sales Collapse

Data from August shows only 118 new condo units sold in the GTA — nearly 90 per cent below the 10-year monthly average. Developers, once eager to launch towers across the region, are now postponing projects. The pipeline of pre-construction activity has thinned, leaving the skyline quieter than in past cycles.

This slowdown follows a decade of rapid growth. Between 2015 and 2022, developers regularly sold 4,000 to 5,000 units per month, a pace that fed Toronto’s surge of cranes. But higher borrowing costs, affordability challenges, and cautious investors have drained momentum.

Why It’s Not the 1990s All Over Again

CMHC stressed that despite surface similarities, today’s downturn differs fundamentally from the collapse three decades ago:

• Stricter Lending Rules: The mortgage stress test ensures borrowers qualify at higher rates, lowering default risks.
• Ongoing Housing Shortage: Unlike the 1990s oversupply, the GTA still faces a chronic shortage relative to immigration-driven demand.
• Diversified Economy: Toronto’s economy is broader, with tech, finance, education, and health sectors providing stability compared to the manufacturing-heavy 1990s.

These buffers, CMHC argues, make a 30–40 per cent crash — as seen in the past — unlikely.

The Rebalancing Ahead

The agency also pointed to a silver lining: with fewer new project launches, supply will gradually tighten. Combined with steady population inflows, this should set the stage for eventual balance. Analysts forecast stabilization in late 2026, provided economic conditions don’t worsen.

Developers echo this cautious optimism. “The slowdown is real, but not fatal,” said a senior executive at a leading GTA builder. “Strong projects with transit and community infrastructure are still finding buyers. It’s just slower and more selective.”

Risks That Can’t Be Ignored

Still, not all signals are comforting. High construction costs, strained developer financing, and assignment resales are pressuring the market. Some investors are already offering discounts on contracts to exit early. If unemployment climbs or global credit tightens, the softness could deepen.

Big Picture for Buyers and Investors

For households looking to buy, the correction may offer opportunities in the resale market. For long-term investors, CMHC’s message is that Toronto’s fundamentals remain intact. Supply-demand imbalance, stricter mortgage rules, and ongoing immigration flows suggest resilience.

The GTA condo market is in correction mode, but CMHC’s assessment suggests turbulence — not collapse — lies ahead.