"It's just a really bad market": Toronto condo purchases still make little sense for investors

  2/10/2026 |   SHARE
Posted in Toronto Real Estate by Vanguard Realty | Back to Main Blog Page

There was no sign of a rebound in the Greater Toronto Area (GTA) condo market at the end of 2025, with prices and sales both tumbling yet again in the fourth quarter.

The average selling price of a condo dived by 5.1% compared with the same time in 2024, according to the Toronto Regional Real Estate Board (TRREB) – and few market watchers are expecting that slide to end this year.

But even with property values slipping, barely any of the investors who once flooded the Toronto condo market are seeing any reason to return to the sector, according to a prominent executive in the space.

“It’s just a really bad market,” Drew Donaldson, principal broker at the Toronto-based Donaldson Capital, told Canadian Mortgage Professional. “Having said that, there are some clients finding what they believe to be good deals where condos have sat for a long time, have had their price reduced three or four times, and now they’re able to scoop [condos] up at what they feel is a reasonable amount.

“But I’m not going to sugarcoat it: it’s a bear market in condos and 2027 is when we should start to see a recovery. I don’t see that happening this year. I think it’s going to be a longer-term process to get us out of it. Eventually, it will come back like everything else, but right now we’re just going to have to weather the storm.”

Immigration cuts freeze up condo demand

In December, Statistics Canada posted news that would have been scarcely believable in previous years: Canada’s population contracted between July and October, falling by over 76,000 people after the federal government lowered immigration targets.

Just three years before, the national population surged by over a million people. That trend saw demand soar for rental units in Toronto and turned them into a red-hot commodity.

But its abrupt end has cooled that demand and caused a huge oversupply of tiny condos, owned by investors but no longer generating rental income.

“I see the condo market being a huge problem. It was overbuilt, and the population is not growing the way it was when people were coming over and needed to either buy or rent one,” Donaldson said.

“Now that the population isn’t growing, there’s not as much pent-up demand and that’s really cooled things. And investors have fled the market because they’re not seeing the appreciation that they had before.”

Even among first-time buyers, plenty of the spare condo inventory in Toronto is too small to enthuse many bidders.

But there’s a clear bright side to the market’s downturn: it’s also putting pressure on prices of larger condos, with buyers who want to live in those as a home no longer facing intense competition from investors for their purchase.

That might eventually bring about a more normal market, Donaldson said: one allowing renters to buy a property, boosted by lower prices, cooler demand and a better interest rate environment.

“Interest rates are reasonable now. They’re not high, they’re not low, but they’re reasonable,” he said. “And that’s really just for people who are going to be occupying the home.

“The investors are still kind of out of the market right now but the people who are going to buy a home, keep it for 10 or 15 years… I do think the market over the next year or two is [promising].”

Condo market’s construction nosedive expected to continue

Unsurprisingly, condo construction is also plummeting in Toronto as investors step back from the market. The 12-month moving average of condo starts peaked at 33,919 in August 2023 – but had slumped to just 10,198 by December 2025, with a further decline likely.

The sluggish condo sector is just one of the reasons for a bleak national outlook on housing starts, Canada Mortgage and Housing Corporation (CMHC) said on Tuesday, and it likely also means the excess inventory will eventually be absorbed even if it isn’t anytime soon.

“It will work itself out long-term. And then 2027, 2028, there’s not a lot of condos being built, so we think that’s going to help the recovery,” Donaldson said. “But the condo market is definitely a concern right now.”

Source: Canadian Mortgage Professional

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