TORONTO – The weakening condo market in the Toronto region has some parallels to the crash of the early 1990s, but several factors mean the current downturn will likely be less severe, Canada’s housing agency said in a report out Wednesday.
Some of the biggest differences are that the Greater Toronto Area now has a more diverse and stable economy, lending rules have become stricter and there remains an underlying shortage of homes.
“Several factors point to a softer correction and a less severe outlook than the 1990s crash,” Canada Mortgage and Housing Corp. said in the report.
There’s no doubt, however, that the market is hurting.
August sales of new condominiums in the GTA totalled 118 units, 90 per cent below the 10-year average, according to Altus Group figures released by an industry group this week.
The lack of sales has led to a nine-year high for unsold units in projects under construction, said an RBC report also out this week, leading to a surge in inventory and a plunge in condo starts.
“The Greater Toronto Area’s new condominium development sector has entered a deep freeze with pre-construction sales plummeting to levels not seen since the global financial crisis,” said Robert Hogue, assistant chief economist at the bank, in the report.
Heightened supply has also led to condo prices, when adjusted for inflation, falling at similar rates to those in the early 1990s, said CMHC.
Setting the peak condo price at the start of 2022 at an index of 100, seasonally adjusted prices have since fallen to 74.4 in the second quarter this year. Over the same 14-quarter period time starting in 1989, prices fell to 69.9 on the index.
The good news is that the lack of new condo starts, and other differences, mean the agency expects prices to start climbing again within a few quarters, putting them on an uptrend some four years faster than during the 1990s.
A stronger economy is a big factor.
The 1990 condo downturn happened during a severe, two-year-long recession, including the steepest employment drop since the Great Depression, after the Bank of Canada hiked interest rates to reduce inflation, said CMHC.
The economy has softened lately because of higher rates and trade tensions, but the agency noted that overall employment has remained stable and it sees only a mild recession ahead.
Past downturns led to stricter lending practices that are helping buffer the impacts today. The mortgage stress test means borrowers are more qualified and fewer are sliding into delinquency, while banks also now require builders to pre-sell at least 70 per cent of condo units before starting construction, compared with 50 per cent in the late 1980s.
The market also has a structural shortage of housing supply, which helped lead to the recent price surge, notably different from the more speculative-driven rise back in the late ‘80s, said CMHC.
As housing starts fall, the agency sees a more balanced market ahead, but it also warned that the same factors limiting the blow now — a stronger economy and housing shortage — mean a potential amplification of concerns about a lack of supply.
Others have been much louder on those concerns.
“With pre-construction inventory dropping dramatically, the signs are clear that the new residential sector in the GTA is basically stopping,” said Justin Sherwood, head of communications at the Building Industry and Land Development Association in a statement Tuesday.
He said the federal government can forget its goal of 500,000 new homes per year as it will be a stretch to keep starts in the 200,000 range, and called for more measures to keep housing construction going.
Hogue at RBC also warned that the development industry risks losing operational capacity during the lull.
“The stark reality facing developers today is vanishing demand and steep costs,” he said.
“The risk of losing institutional knowledge and development expertise during prolonged inactivity could create supply bottlenecks when demand improves.”
The federal government has been rolling out measures to improve supply, including the Build Canada Homes program launched on Sept. 14 with an initial investment of $13 billion to build affordable housing at scale.
This report by The Canadian Press was first published Sept. 24, 2025.
